Voters in Texas decided on May 7 to continue regulating ride-sharing businesses operating in Austin, the state capital. Residents voted against Proposition 1, which would have overturned regulations the city passed in December 2015 that require fingerprint-based background checks for drivers and a prohibition on picking up and dropping off customers while parked in traffic lanes. Both Uber and Lyft have suspended operations in Austin as a result.
Lone Star Cab President and CEO Solomon Kassa took the direct approach of coordinating a political donation to the November 2015 reelection campaign of city council member Ann Kitchen (D), who spearheaded the successful effort to add stricter background checks and higher fees for Uber and Lyft. Kassa has long been notable in making donations to Democratic candidates. Campaign finance reports show Kasha bundled $4,000 worth of campaign donations from five cab drivers and others. The money was given to Kitchen a few days before the election. Kitchen defeated six other candidates with 54% of the vote and avoided a runoff contest.
According to a story by the Austin American-Statesman in 2014, taxi drivers, shuttle services and top executives donated nearly $54,000 into city council members' campaigns. Meanwhile, Uber and Lyft had contributed no money to the partisan campaigns.
Austin City Council member Ann Kitchen
Donations from taxi owners constituted more than 20% of fund Kitchen reported in the eight days before the election when reports are not as likely to be noticed, according to AustinInno. Kitchen appears to have received more campaign cash from taxi companies than any other council member who was elected last year, an analysis of campaign records shows. Kitchen has since claimed: “Contributions are not about favors, at all." She also claimed that the council is treating all vehicles for hire equitably.
About 56 percent of voters rejected Proposition 1 on May 7. Uber and Lyft spent together about $8 million in a failed bid to get it passed. The measure would have repealed earlier regulations for drivers operating through transportation network companies such as Uber and Lyft to pass a driver-history background check and a fingerprint background check. The fingerprints would eventually go the FBI. The companies said the regulations were making it too difficult to do business.
The owners of Austin nightclub and events companies rallied behind Uber, Lyft and other organizations to override the regulations approved by the Austin City Council. They asserted that Uber and Lyft are essential to addressing downtown parking and traffic congestion, as well as for providing transportation options for drunk patrons throughout the city known for its vibrant nightlife. When appeals to the city council were unsuccessful, the ride-sharing companies and supporters were able to get Proposition 1 before Austin voters.
Advocates of the regulations contended that citizens are safer because of the mandatory fingerprinting. The Our City Our Safety Our Choice PAC, which opposed Proposition 1, put together a coalition of Democrats, liberals, and some first-responders, arguing that citizens’ lives were being put at risk by ride-sharing drivers.
However, Temple University law professor Brishen Rogers says “This is about politics." Rogers says that the controversy is about the kinds of companies cities, especially high-tech cities such as Austin and San Francisco, want to embrace. These issues, he said, are “playing out through the lens of safety. But I don't think safety is the issue."
Background checks are not a cure-all for preventing bad behavior by drivers, says Rogers. "As the Equal Employment Opportunity Commission (EEOC) has emphasized, background checks have limited predictive value and can have a disparate impact on minority drivers," Rogers wrote in a paper about Uber that was published last year.
According to the taxi companies, retaining the city regulations means requiring Uber and Lyft to play by the same rules they do, which means fingerprints and higher fees. Uber and Lyft sought to preserve "temporary" rules the city council put in place last year that Uber says are one of the best examples of fair regulation in the nation.
Uber and Lyft are the two ride-sharing companies most affected. The two offer services that match drivers associated with them to riders seeking their services. Their services have become popular throughout the country, and have expanded to other markets including China. Uber and Lyft drivers are private owners of vehicles who pay a fee to be connected to customers. Uber has worked with regulators and local lawmakers in recent years to pass permanent rules recognizing app-based car services as distinct from taxis. Uber is now regulated by such laws in 30 states as well as hundreds of cities around the world where it operates. Uber and Lyft spent at least $8.6 million on a local campaign advocating Proposition 1, sending out door-to-door canvassers and text messages to residents.
Lyft paused operations in Houston after fingerprints were made mandatory in that city and has not resumed operations since then. Both Uber and Lyft have ceased operations within Austin. In Uber’s case, it will continue to operate in areas surrounding Austin and permit drivers to drop passengers off inside city limits. “Disappointment does not begin to describe how we feel about shutting down operations in Austin,” wrote Chris Nakutis, Uber’s general manager in Austin, in an emailed statement. “We hope the city council will reconsider their ordinance so we can work together to make the streets of Austin a safer place for everyone.”
Roughly 10,000 drivers who rely on ride sharing for their income have been thrown out of work by Austin’s rules and the response by Uber and Lyft. Austin is now the largest U.S. city where Uber isn’t currently available. Riders clicking on the Lyft app in Austin received the following message: "Lyft is not available in this area yet." Uber told prospective passengers, "NO PICKUPS as of May 9th," adding, "Due to regulations passed by the City Council, Uber is no longer available within Austin city limits."