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Question of the Month ~ November 2014


Q. How are states and localities regulating ride-sharing services?

In just a few short years, the presence of ride-sharing companies such as Uber, Lyft and Sidecar has spread to more than 60 metropolitan areas across the country — 15 of which are in the Midwest.
With a simple tap of a button on a smartphone application, a passenger can connect with a driver. The driver, using his or her personal vehicle, then provides a ride to a desired location, oftentimes at much cheaper prices than a traditional taxi or car service.
Should these ride-sharing companies fall under the same licensing and insurance regulations as taxi and limousine services? Should they fall under a new type of classification of service, or not be regulated at all?
These are some of the questions that states and municipalities have begun to address with the rise in ride-sharing.
In 2013, California (home to Uber, Lyft and Sidecar) became the first U.S. state to regulate ride-sharing companies. The state’s Public Utility Commission created the category of transportation networking companies, or TNCs, and adopted licensing rules: driver background checks and training, insurance requirements (commercial liability coverage of at least $1 million per incident), and reporting requirements.
This year, nine U.S. states, including Illinois, considered new ride-sharing rules and regulations. Thus far, though, only Colorado’s SB 125 has been passed. Like California’s existing regulations, Colorado’s new law designates ride-sharing companies as TNCs, specifies insurance requirements for drivers, and requires background checks and training.
Illinois Gov. Pat Quinn vetoed HB 4075 and HB 5331 earlier this year, saying he didn’t want the state to impose a “one size fits all” approach on local governments. Together, the two bills would have required ride-sharing drivers to carry commercial liability insurance and undergo background checks. In addition, vehicles would have been subject to safety inspections, and drivers working more than 18 hours a week would have needed a chauffeur’s license.
The vetoes in Illinois left standing an ordinance set by the Chicago City Council. Under that ordinance, ride-sharing companies are considered “transportation network providers” and must pay an annual registration fee of $25,000. The vehicles used for the ride-sharing services are subject to annual inspections, and drivers must hold commercial liability insurance.
In Detroit, officials initially banned ride-sharing but eventually signed a two-year agreement with Lyft Inc. Under the agreement, drivers must undergo background checks and have commercial auto insurance. Several other Midwestern cities, including Columbus, Detroit and Minneapolis, have also taken action to allow ride-sharing companies to continue operating. Earlier this year, Seattle became the first city to restrict the number of vehicles that a ride-share company can operate (150).


Article written by Laura Tomaka, CSG Midwest assistant editor and policy analyst. Question of the Month highlights an inquiry received by CSG Midwest through its Information Help Line.