State permits bring big savings to Uber, Lyft compared to Austin fees


A state agency was required to set the fee level under a law signed by Gov. Abbott in May, and did so Dec. 1.

That annual fee is less than 2 percent of what Austin alone was charging to oversee the ride-hailing industry.

So far just Uber and a Houston-based ride-hailing firm have applied, but others are expected this month.

Ride-hailing companies such as Uber and Lyft will pay the state $10,500 a year each to operate in Texas, and just $7,500 in subsequent years, under rules that went into effect Dec. 1.

That statewide figure amounts to less than 2 percent of the $560,000 that Austin collected from about a half-dozen ride-hailing companies combined during the fiscal year that ended Sept. 30. Other cities had even larger fees meant to cover the expense of regulating the industry.

Austin and those other Texas cities ceased to get such fees — calculated at 1 percent of each company’s gross sales in Austin — on May 29 when Gov. Greg Abbott signed House Bill 100 into law and local governments could no longer regulate ride-hailing services.

That new statewide fee is supposed “to cover the costs of administering” ride-hailing oversight throughout Texas. The state Department of Licensing and Regulation, tasked with writing those rules under HB 100 and keeping an eye on the companies, says it will add the equivalent of a new full-time worker and another part-timer to accomplish that task.

“That’s totally inadequate, just a joke,” said David Butts, an Austin political consultant who ran a successful campaign in spring 2016 to defeat a proposed city ordinance, put on the ballot by Uber and Lyft, that would have replaced a city law the companies didn’t like. When that ballot issue failed, Uber and Lyft went to the Legislature, which passed HB 100 to override local laws from Austin, Houston and other Texas cities.

RELATED: How the great Austin ride-hailing fracas began

Susan Stanford, a spokeswoman for the Licensing and Regulation Department, said the fee level was based on the expectation that 10 to 13 ride-hailing companies will apply for permits and pay the fees. That would yield, at most, $136,500 in the first year, and roughly $100,000 annually based on the lower fees after the first year. And Stanford, in an email, left open the possibility that the companies eventually might pay even less.

“The Department has historically reduced fees in its programs and will continue to review the (ride-hailing) program to do the same,” Stanford wrote.

HB 100 supporters, including Abbott, said this spring that the state law was needed to eliminate a “patchwork” of local laws that were confusing for consumers and burdensome on the companies. More than three dozen states have taken their regulation of the young industry statewide.

The ride-hailing companies, Butts said, “are going to basically free-load off the cities and the state, with almost no supervision whatsoever. … Some people will probably be hurt who didn’t have to be.”

ALSO READ: Austin deals with ride-hailing in the wake of the state law

After Abbott signed the bill, Uber and Lyft, which had shut down their apps within Austin city limits two days after the city’s May 2016 election, quickly resumed operations here.

The Licensing and Regulation Department so far has received applications from Uber and Coog Ride, a Houston-based ride-hailing company, said Michael Strawn, a program specialist with the state agency. He said he expects at least three other companies to sign on this month, the period allowed under the law for existing ride-hailing businesses to apply for a permit.

Austin has about a half-dozen active ride-hailing companies, including startups like Fasten and the nonprofit RideAustin.

The department as of Thursday had yet to receive any application fees, which would have to come through the mail, Strawn said, because the agency is not yet set up to receive the payments electronically.

The regulations include no fees for drivers, only for companies. That includes allowing municipally owned commercial airports, such as Austin-Bergstrom International Airport, to charge a “reasonable” fee for conducting ride-hailing business on airport property, something that the Legislature was forced to allow under federal aviation law.

Austin’s airport currently charges $2.50 for each time a ride-hailing driver picks up or drops off a passenger, and budgeted $830,000 in anticipated revenue from that fee in the fiscal year that began Oct. 1.

Ride-hailing companies in Texas since at least May 29 have been operating legally, without permits or fees, as HB 100 gave the state agency time to craft the regulations. The state Licensing and Regulation Department’s governing commission approved its rules Oct. 20, and they went into effect Dec. 1.

HB 100 includes a few requirements for ride-hailing drivers: They must be at least 18 years old, with a valid driver’s license (from any state) and proof that their car is registered. The companies must screen each driver by running a multistate criminal background check, reviewing driving records and checking whether the applicant appears on a national sex offender database.

The law lists several categories of criminal convictions for drivers that would prevent companies from hiring them, if those convictions occurred within the past three to seven years. Those listed by the U.S. Justice Department as a sex offender may not drive for the companies, the law says.

The main issue over ride-hailing regulation is that the state law allows the name-based background checks that Lyft and Uber prefer, while some city ordinances like Austin’s had required fingerprint-based background checks, which supporters described as more accurate and critics decried as more onerous.

HB 100 also stipulates that all ride-hailing drivers will be considered independent contractors, a provision important to Uber and Lyft because drivers in some other states have asserted they are employees and have attempted to collectively bargain for better pay and health benefits.

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