One senator’s war on innovation

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The California Legislature is well-known for its heavy-handed approach to business. The state recently scored dead last in Chief Executive magazine’s survey of CEOs, which isn’t even newsworthy, given the state continually ranks at the bottom. I recall the senator who years ago, after being asked about ongoing business flight, said it’s OK with him if a few companies go and “rip off” some other state. Steadily and often quietly, more than a few California companies have taken theirrip off — jobs, taxes, development — to Nevada, Utah, and Texas.

Yet there has been one part of the economy where legislators have been more reasonable. That’s the sharing economy, and in particular, the situation with transportation network companies (TNCs)such as Uber and Lyft. These ride-hailing innovators are emblematic of the entire Bay Area tech vibe that is the state’s economic bright spot. Even California’s lefty Democrats tend to recognize the silliness of siding with the grimy old taxicab industry, as it seeks to shut out innovative — and popular — competitors.

But while the vast majority of California legislators have been willing to approve bills backed by the ride-sharing industry, they ultimately go nowhere, mostly thanks to one Democratic lawmaker who does a better job representing the taxi industry than his own San Diego constituents. It’s an eye-popping situation, given Sen. Ben Hueso’s older brothers own San Diego’s taxicab company, USA Cab. As chairman of the state Senate Energy, Utilities and Communications Committee, Hueso has refused to bring to a vote bills that cleared the Assembly on nearly unanimous votes.

For instance, A.B. 828 passed last May on a 71-1 vote. The California Department of Motor Vehicles issued an advisory last year stating “even occasional use of a vehicle in this manner (for-ride-sharing) requires it to be registered commercially.” Requiring commercial plates for people who occasionally drive their personal cars in this way would impose a raft of taxi-style regulations.

The DMV ultimately withdrew its edict after receiving opprobrium for seeking to apply 81-year-old regulations to a modern, tech-based business. But the measure should have had a hearing. Assemblyman Evan Low, D-Campbell, captured one reason ride-sharing is so appealing, even to the political left: “Exempting TNC drivers from the commercial vehicle registration process encourages the expansion of TNCs, which reduces vehicle trips, total vehicle miles driven and the carbon emissions that contribute to climate change.”

Then there’s A.B. 1360, which cleared the Assembly 73-0 last May. It promotes another widely sought goal: carpooling. The measure would allow Uber, Lyft, and other companies to charge carpoolers individual fares rather than single group fares, given that carpoolers often have different destinations. That measure also remains bottled up in committee. Hueso has said these bills will get a hearing late in the legislative process, but they’ve been held up for ages in his committee.

Last month, his committee passed a bill that would impose rate regulations on ride-sharing companies, but it ultimately was halted in the Senate Transportation Committee. The Los Angeles Times reported three years ago Hueso “introduced a bill to classify taxi drivers as independent contractors instead of employees of cab companies.” It failed, but it’s ironic, given many ride-sharing opponents want to force the app-based companies to treat their drivers as full-time employees.

One of my pet peeves: those myriad legislators who spend their time as shills for their own particular hobby horses. There’s a former police captain, for instance, who basically represents the law-enforcement lobby in the Assembly; union legislators who do unions’ bidding and so forth. But Hueso’s role here is particularly annoying, given the narrow (and fading) size of the industry he champions.

“Hueso said he never had any personal financial interest in USA Cab and sold his share in the related business in the early 2000s, a few years before first winning elected office on San Diego’s City Council,” the Times reported in March. Still, the Senate should be more sensitive to appearances — and to the concept of fairness.

There’s quite a hypocrisy angle here, also. Senate Majority Leader Kevin De Leon, D-Los Angeles, publicly slammed the U.S. Senate in March for its refusal to hold a vote on the nomination of Judge Merrick Garland for the Supreme Court. Yet De Leon allows his childhood friend, Hueso, single-handedly to delay votes on bills widely supported in both houses of the Legislature.

It’s hard to understand special protections for the taxi industry given De Leon’s concern about low-wage workers (he co-sponsored the statewide minimum-wage boost). As I reported in the San Diego Union-Tribune, “89 percent of the city’s cab drivers rent cabs. Because of a city-imposed cap on the number of cabs, these drivers cannot go out on their own. They pay around $1,200 a month to lease their cabs.” A prominent survey showed the city’s cabbies “earn a median of less than $5 an hour.”

San Diego deregulated the permit system, thus dramatically lowering the cost of medallions and allowing drivers to go out on their own. That’s the best way to compete with Uber and Lyft — not by protecting a small group of cab owners. Some legislation might be needed — last year, the state passed a reasonable insurance-related compromise that clarifies when a driver is on call for the company — but competition offers the best solution.

Ironically, the Austin, Texas City Council voted for onerous new ride-sharing regulations — and the city’s voters sided with the council by rejecting a referendum to overturn the law. Now that Uber and Lyft have suspended operations there, the city reportedly is encouraging an alternative ride-sharing nonprofit. That sounds like the kind of lefty policy that California politicians usually promote.

But as foolish as Austin’s approach has been, at least the council approved the rules and voters had their say at the ballot box. What explains California’s willingness to let one senator — and one“whose family has deep ties to the taxi industry,” as a San Diego Union-Tribune editorial explained — put the kibosh on reasonable ride-sharing rules that virtually everyone else in the Legislature favors?

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