Gov. Tom Wolf will end a two-year battle with the Philadelphia Parking Authority today by signing the ride-sharing bill passed by lawmakers in late October.
It’s the last chapter in a story that got its start back in the summer of 2014, when all around Harrisburg and back near his home office in Pittsburgh, state Sen. Wayne Fontana kept hearing about this thing called Uber. Or to hear him say it in an accent that sounds less his native Pittsburgh than Brooklyn, “yoo-ber.”
He hadn’t rode in one himself, but he knew others who liked it. Bartenders were talking about an easy way to get drunk customers home. The mayor of Pittsburgh was asking regulators to work with Uber and Lyft. One of Fontana’s colleagues in the Senate had a son who’d become a driver.
So in July of that year the Democrat came up with a measure to legalize ride-sharing. It wasn’t complete given that it excluded Philadelphia, but he had plans to bring the city and the PPA into the mix later. A funny thing happened, though. His bill was quickly shelved and not for another two years and three months would a ride-sharing bill pass. Instead, Pennsylvania and especially Philadelphia were treated to a saga of partisanship, lobbying, a temporary truce and even police horses that finally ended today with Governor Tom Wolf signing the state’s first ride-sharing bill.
“There was a lot of hands in the soup,” Fontana said. “And when that happens it delays things. And that happens a lot up here.”
The new bill isn’t the same as Fontana’s first stab — it ensures a cut of revenue for the Philadelphia School District, mandates Uber and Lyft to have at least 70 wheelchair accessible vehicles and probably puts the PPA in the worst position of any of the parties involved — but the basic structure set for insurance companies and drivers is similar. And it’s worth noting that riders never really felt the sting of regulation, as UberX and Lyft launched and expanded greatly in the city during the fights on the streets and in courtrooms with the Philadelphia Parking Authority.
As we all let out a collective sigh over the legalization of ride-sharing, this is a look back at that mess and the technology’s effects on the cab industry, the city and the PPA going forward.
Did Uber even want to be legalized at first?
UberX driver Raymond Reyes was one of the early PPA sting victims. In November 2014 he picked up a man and a woman dressed in Eagles gear in Society Hill. He thought they might not be the usual passengers when they shifted from cursory conversation topics like the weather or sports to the PPA.
“They were basically staging a conversation bashing the PPA,” Reyes told Billy Penn earlier this year, “and making sure I could hear every word.”
These stings were most common in the first few weeks UberX began operating. Sometimes police horses got involved. It was a sad portrait of Old Philadelphia: The bureaucracy attempting to take down a new technology using a hooved animal most cities had discarded decades ago.
Then-Mayor Michael Nutter tweeted his support for UberX and noted it was the state-controlled PPA cracking down.
Then-Councilman Jim Kenney threw a little shade in Nutter’s direction, saying if Nutter was serious about embracing ride-sharing in the city he wouldn’t let the police assist the PPA in its stings. Kenney also lamented Philadelphia’s lack of options, because it didn’t have authority over the PPA.
“We’re supposed to have home rule in Philly but that’s really a joke,” he said. “We have to go to Harrisburg to change our underwear.”
And in Harrisburg none of the parties — the legislature, the PPA or the ride-sharing companies — seemed ready to act.
When Fontana first started pitching his bill, in June 2014, he got visits from all kinds of groups. Yellow Cab was pushing against it. Insurance companies were curious as to how much they’d have to cover drivers. Even rental car companies expressed some concern about how it would all work. Conspicuously absent? The PPA and ride-sharing companies.
Fontana said the PPA wanted nothing to do with legislation at first. The regulatory agency had good reason. For one, the entry of ride-sharing was guaranteed to disrupt the taxi industry, which had for years been a reliable cash cow for the PPA. The other would be fear of the unknown. With ride-sharing as a new technology, the PPA couldn’t have been assured it would make enough from Uber and Lyft to replace what it would inevitably lose from the decline of cabs, or even if it could regulate ride-sharing. Fontana said the PPA didn’t want the Pennsylvania Utility Commission (PUC) to assume regulatory duties for ride-sharing in Philly like it would for the rest of the state.
Uber and Lyft had reasons to stay away from the negotiating table, too. When not legalized, as was the case in Philadelphia, they didn’t have to pay any fees to a regulator, as cabs and cab drivers had to do with the PPA, and they could easily recruit drivers. Unlike cabbies, UberX and Lyft drivers didn’t have to pay for yearly cab inspections, renewals of driver’s certificates and commercial insurance.
“Uber and Lyft weren’t pushing, either,” Fontana said, “because they could operate temporarily. They weren’t in a hurry.”
Uber disputes this characterization. Spokesperson Craig Ewer said the ride-sharing company attempted to negotiate with the PPA before launching UberX in October 2014 and “worked with elected and appointed officials on establishing a regulatory framework that meets the needs of riders and drivers in Pennsylvania.”
In 2015, Uber certainly had upped its involvement in pursuing legislation, to the extent that, Fontana claims, Uber lobbyists provided the groundwork for a ride-sharing bill including Philadelphia to Republican state Sen. Camera Bartolotta. Bartolotta did not respond to a request for comment. Her bill, SB 984, was introduced in September 2015. Fontana’s got lost in committee, a move the lawmaker claims happened because Republicans wanted to get the credit for sponsoring such popular legislation and as the majority party could easily shelve a Democrat’s bill.
Bartolotta’s bill took its own circuitous route. It sustained hundreds of amendments from the Senate and House, many of them related to solving the Philadelphia problem and to placating the cab industry. By the time it reached its final draft the bill was 85 pages longer than the original 35 it had been. Even the final incarnation faced some blowback because of a measure some legislators worried would override the PUC’s authority to collect an outstanding $11.5 million fine against Uber.
“If it’s a good bill and goes on long enough,” Fontana said, “the politics enters from every angle.”
Pennsylvania’s holdout wasn’t unique, but the state had clearly fallen behind the curve. According to the free market think tank R Street, 34 states had passed ride-sharing specific legislation by June of this year. After a temporary deal legalizing ride-sharing in Philadelphia for the Democratic National Convention and through September was passed as part of the budget, the urgency finally became evident. The House voted unanimously to pass the bill. Only one Senator voted against it, Jay Costa, who protested the amendment that could lead to a reduced Uber fine.
The gutting of the cab industry
If there’s one group that wouldn’t be happy with a bill finally legalizing ride-sharing, you’d think it would be Philadelphia’s collection of cab drivers and medallion owners. And if there’s one person among that group specifically, it would be Ronald Blount.
Blount is the chairman of the Taxi Workers Alliance of Pennsylvania and led a ride-sharing-related lawsuit against the PPA that briefly led to a judge ordering UberX and Lyft to stop operating this fall. He isn’t as perturbed by the legislation as you might guess.
“We wanted a level playing field,” he said. “We were hoping they would be similarly regulated as we are. What they did was the opposite. They deregulated the taxi industry. There’s some good stuff in the bill… (since) we’re not confined to the antiquated system the PPA mandated.”
Cab drivers now won’t have to pay high of fees for driver certification each year. The inspection fee has been reduced from as much as $100 to $25. For owners, fees to the PPA could be lower, with the legislation calling for a maximum 1 percent assessment fee of their total revenue annually. The most prominent change is to the fare system. Cabs companies can now charge variable rates, similar to how Uber and Lyft do their dynamic pricing.
It’s unlikely those measures will be enough to save the Philly cab industry. The supply of cab drivers in Philadelphia has fallen from about 5,000, according to Blount, to 3,500. And fewer cabbies means fewer cars. Even though about 1,600 cabs are regulated to operate in Philly, closer to 1,400 are on the road, with 200 on “voluntary suspension.” The medallions, needed to operate a cab, have gone from a value of $545,000 in July 2014 to as low as $10,000. That’s the amount the PPA set for minimum bids on medallions this summer.
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Republican state Sen. Bob Godshall, whose amendments solidified Philadelphia’s place in the bill, said the taxi lobby pushed some lawmakers to want to make last-minute changes, but the momentum of the ride-sharing companies exceeded the sympathy for cabs. The cab industry’s lobbying efforts were also likely mistargeted, at first anyway. Blount said initially the industry attempted to convince lawmakers to stop ride-sharing and then later switched to pushing for similar regulations between ride-sharing and cab companies.
“It gives us an opportunity to change ourselves,” he said, “and see if we can work together as an industry instead of fighting each other.”
More ride-sharing taxes on the horizon?
The city got a taste of legal ride-sharing this summer. After SEPTA pulled its damaged Silverliner V cars, throwing Regional Rail into disarray, and Philly decided it couldn’t risk a US Senator getting pulled over in an UberX at the DNC, Harrisburg worked out a deal legalizing UberX and Lyft from mid July to the end of September.
During that period in Philadelphia, they brought in $53 million in 78 days, according to the Inquirer. That comes out to an average of $679,487 a day, from about 59,000 daily rides. Uber was far more popular than Lyft, taking in 80 percent of the revenue.
Averaged out over a full year, the companies would see revenues of about $248 million, and schools and the PPA will get a 1.4% cut of it. The 1.4%, per the bill, will be collected by the PPA. The PPA would then give ⅔ of the 1.4% to the Philadelphia School District. That would mean schools would get a little more than $2 million a year. The PPA would get a little more than $1 million.
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The PPA is expected to go back to Harrisburg and ask for a bigger cut in the coming years. The 1.4% fee the agency collects lasts through December 2019 and, per the bill, cannot be reduced. A spokesperson with the PPA did not respond to an interview request.
Before the bill passed, a spokesperson for the group said the PPA would need $4 million a year to effectively regulate ride-sharing. It won’t come close to making that much. Likely to collect only about $1 million a year and standing to make less off cabs’ ever-declining share of the market, the PPA has one of the least favorable outcomes at the end of this saga.
For Philadelphia, the windfall could end up being greater than the $2 million the school district will likely make. This is a city that formalized a taxation system for AirBNB ahead of the pope’s visit and the DNC with unanimous approval from City Council. Now that UberX and Lyft are legal expect Philly’s leaders to try and get a cut for the city in the future.
UberX came into Philadelphia avoiding horses. Its next step might be avoiding taxes.
