New players in Legislature’s debate over rideshare drivers

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A rider checks prices on the Uber application.

It had been deadly quiet for nearly a month since three state senators filed bills that would wrest authority to regulate ridesharing companies from cities.

Until the opening weekend for the technology portion of Austin’s now internationally known SXSW conference. On a sodden Saturday night with the downtown jammed with people from all over the world, Fasten, the official ridesharing company for the festival essentially shut down. For a few of those hours, so did RideAustin, the city’s non-profit service.

Fasten and RideAustin are two of the most aggressive of the eight companies that moved into Austin after the two largest ridesharing companies in the world, Uber and Lyft, left the city, largely in protest of the city’s requirement that their drivers be fingerprinted.

Tech and business publications pronounced the weekend an embarrassment for the companies and the city. “Things seem to be working fine today, but Austin definitely missed its chance to prove that cities are ready to function without Uber or Lyft,” Tech Crunch reported the day after the Fasten and RideAustin shutdown.

“It wasn’t the greatest page in our history,” Fasten’s CEO, Kirill Evdakov, told Tech Crunch. “Hopefully we can regain the trust.”

RideAustin issued an apology to customers on its Facebook page. “We let our drivers, the Austin community and the visitors down. We hate to fail – but of course it’s natural that we do. The best we can do in these situations is to communicate with the community and to be as open as we always are.”

It was noisy again on Tuesday when the state Senate Committee on Business & Commerce convened a public hearing that included discussion of Senate Bills 113, 176 and 361.

State Sens. Don Huffines, Charles Schwertner, Robert Nichols, the respective authors of the bills, filed them on the conviction that local elected officials have overreached, imposing an unnecessary regulation on a burgeoning and popular industry.

They heard from an expected alliance of city and taxicab company representatives just how necessary those regulations, particularly fingerprinting, are. (You can view the entire hearing here.)

Heather Lockhart with the Texas Municipal League. Kathryn Bruning, from the office of Sylvester Turner in Houston, where the city is trying to maintain its fingerprinting requirement and keep Uber from leaving. Ann Kitchen, who wrote the fingerprinting requirement for the Austin City Council that touched off Proposition One, the citywide referendum that resulted in Uber and Lyft leaving.

Austin, Houston, San Antonio and Dallas taxi officials either spoke or submitted written opposition to the bills.

Many of the state’s unions are now on record as opposed to any ridesharing reform from the Legislature. (You can see the entire witness list, for and against the bills, here.)

These players were largely responsible for making sure a similar ridesharing reform bill never made it out of committee in the 2015 session.

This time there will be new opponents with a vested interest in maintaining the current systems in Austin, Houston and elsewhere where local elected officials have insisted ridesharing drivers be fingerprinted.

Despite their SXSW stumble, Fasten CFO David Piperno told the Business & Commerce Committee his company believes in fingerprinting. So does Regina Radulski, vice president of operations for GetMe LLC, one of the smaller ridesharing companies that moved into Austin when Uber and Lyft left.

Fasten and GetMe drivers, according to Austin Transportation Department records, are currently in compliance with Austin’s fingerprinting requirement.  TNC Memo – January 2017

GetMe is backing its opposition by putting Austin lobbyist Dean McWilliams on retainer with a contract valued at between $100,000 and $149,999, according to Texas Ethics Commission records.

McWilliams is also representing this session, with a $50,000 and $99,999 contract, MorphoTrust USA, a national company with an exclusive contract worth more than $4 million a year for nearly all of the state’s fingerprinting services.

In this past year MorphoTrust, which runs the fingerprinting in Houston Uber is fighting, quietly added the city of Austin to its list of clients.

The city of Austin turned to MorphoTrust in July of 2016, two months after a majority representing less than 10 percent of registered voters in the city voted against a proposition that would have allowed ridesharing companies to operate using their own background check systems.

After reports circulated that the remaining ridesharing companies were not following the fingerprinting mandate, Gordon Derr, assistant director of the Transportation Department, announced MorphoTrust would be setting up a fingerprinting center.

City taxpayers have to date spent $50,661 on MorphoTrust contracts, according to city contracts obtained by Texas Monitor.  MorphoTrust USA Memo of Understanding MorphoTrust USA Contract 1 MorphoTrust USA Contract 2 MorphoTrust USA Contract 3

Neither McWilliams nor officials for GetMe returned calls or emails asking whether or not they planned to work to defeat any of the ridesharing bills. McWilliams, according to his assistant, was attending a funeral, but had several days afterward to reply.

The bills have gotten a big boost from a recent Land Econ Group study that shows tens of millions of dollars in lost economic impact, fares and customer savings in Austin, Houston and four other cities where Lyft cannot operate.

In Senate Bill 176, Schwertner, R- Georgetown, offers a set of ridesharing regulations for companies operating anywhere in Texas. Conspicuously absent from those regulations is fingerprinting.

The bill got a boost when Sen. Chuy Hinojosa, a Democrat from McAllen and a member of the Senate’s Transportation Committee, signed on as a co-author. Two days later, Sen. Paul Bettencourt, R-Houston, vice-chairman of the Senate Committee on Intergovernmental Relations, was named a co-author.

Nichols, R-Jacksonville, is asking in SB 361 for the same state control, with a more extensive list of regulations that also do not include fingerprinting.

Huffines, R-Dallas, is, with SB 113, suggesting that local governments allow ridesharing, taxi, and limousine companies let the free market regulate their businesses as long as drivers are insured and have not been convicted of sex offenses.

“The biggest threat to innovative and disruptive services is government regulation,” Huffines told Texas Monitor. “If we create a truly free market for ridesharing and taxi cabs, the future is limitless. Instead of shifting the regulatory playing field from local to state level, the Texas Legislature should get regulations off the backs of innovators, investors, and tech leaders who can create amazing new options for consumers.”

After the hearing Tuesday, the three bills remain pending with the Business and Commerce Committee, whose membership includes Schwertner and Nichols. It is likely that before coming out of that committee, any or all of the bills will be combined or two of them abandoned in favor of the bill with the greatest likelihood for passage.

Huffines said he fully expects the crony municipal and taxi forces to try to kill all of the bills.

“My legislation unwinds nearly 30 years of burdensome regulations for the taxicab industry, but I have yet to see them support it,” Huffines said. Many taxi cab companies have built their business model on a heavy-handed regulatory framework that doesn’t allow anyone else to enter their market.”

However, if the fate of Christopher Paddie’s House Bill 2440 in the last session is any guide, the damage to whatever ridesharing bill comes out of committee will be done in the joint Calendars Committee. It is this committee that decides which bills make it to the floors of the Legislature for consideration.

Paddie, R- Marshall, had several co-authors for his bill, but the cities, particularly Dallas’ mayor Mike Rawlings and the taxi lobby, directed their pressure at House Speaker Joe Straus.

Ethics Commission records show that Texas Taxi and its roughly 2,500 drivers paid eight lobbyists to put the screws to Paddie’s bill, among others. By way of comparison, Texas Taxi retained one lobbyist in 2013, according to records.

So far in this session, Texas Taxi is employing two lobbyists, Katheryn Johnson and Joe Garcia. Yellow Cab has hired the Eppstein Group headed by Bryan Eppstein.

And this is where things get all sorts of interesting. Garcia is the former chief of staff for state Sen. Eddie Lucio III, D-Brownsville, who happened to be vice-chairman of the Calendars Committee where Paddie’s ridesharing bill died without making it to the floor in the last session.

Garcia was also, by far, the largest single donor in a bundle of nearly $20,000 of donations made to Kitchen, who heads the Austin council’s Mobility Committee, and her City Council allies prior to the ridesharing referendum.

Cab company officials had by the fall of 2014 donated more than $54,000 to council members to preserve the regulatory status quo, according to an Austin American-Statesman story at the time.

Council member Kathie Tovo used some of the thousands of dollars from the taxi industry to defeat former council member Chris Riley, an outspoken proponent of the original ordinance that allowed Uber and Lyft to operate legally and without fingerprinting in Austin.

In a twist, Lucio is no longer a member of the Calendars Committee, while Paddie is. Should he wish to support a current ridesharing deregulation bill, he’ll have to contend with state Reps. Byron Cook, R-Corsicana, and Charlie Geren, R-Fort Worth, House Speaker Straus’ most powerful remaining lieutenants.

Geren is a former client of of Yellow Cab’s lobbyist, Bryan Eppstein. And in his last slender victory for his eighth term, Cook’s political consultant was Bryan Eppstein.

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