Draft ordinance anticipates arrival of Uber, Lyft in Duluth

People in need of a lift in Duluth may soon have a new option.

Duluth City Councilor Noah Hobbs has been working on an ordinance that could open the Duluth market to ride services such as Uber and Lyft.

As for the arrival of those services in Duluth, Hobbs believes that's a question of "when," not "if." Yet he hopes the ordinance he is drafting will tilt the balance toward an earlier start.

"I think this will certainly accelerate the process - us working on it and letting Uber know that we're in the process of working on an ordinance. But I think inevitably they would come to Duluth," he said.

Uber already is active in the Twin Cities and the Fargo-Moorhead market, and is preparing to launch service in Rochester.

Duluth Mayor Emily Larson praised Hobbs for his efforts, saying: "It seems as though Councilor Hobbs is doing some really good homework with community partners and gauging their interest. There is a lot of interest and demand on the part of consumers for this option in the city of Duluth. I hear about it very regularly."

Hobbs contends his ordinance will better prepare the city for the inevitable.

"I think people understand that regardless of this ordinance, Uber could operate in Duluth, and we're making sure that there are rules for them to play by before they get up here and are disruptive in the way that they have been historically when they first started out," he said.

Still, Hobbs acknowledged conventional taxi services have legitimate concerns.

"I think the response has been more positive than I initially thought it would be. They have some hesitations and questions, as they should. It isn't necessarily the same industry, but it serves a similar purpose. And they would be kind of fighting over a piece of the same pie," he said.

Differentiation

Dean Hansen owns Gold Door Taxi Co. and operates a 13-vehicle fleet, the largest in Duluth. He pointed to new regulations that took effect in January, noting they boosted cab maintenance expectations, increased insurance requirements and established a host of other standards. The expense of compliance has driven some of his smaller competitors out of the business, and Hansen estimates the number of taxicabs on the road in Duluth has declined by at least 20 percent as a result.

"As they were bringing in these new regulations, they were telling us that these regulations are in place to encompass rideshare programs that are eventually going to be coming. And they wanted to get a head start on it so that they could control the rideshares coming and pretty much stop them, if possible. That's why they wanted to impose all these new regulations, and we all went along with it. Then, I see Mr. Hobbs, six months later on the TV, begging Uber to come. It just seems weird," he said.

Hansen said he would have expected Duluth to require any new ride service provider to comply with the same regulations that govern taxis, but he has been surprised to learn the city may take a different tack.

"Now they want to put a separate set of rules in place, not the original ones that were supposed to encompass rideshare programs but a new set to give them special treatment. Why? They're doing the exact same thing," he said.

Duluth City Councilor Joel Sipress shared a similar opinion, saying: "On the one hand, I think it's important for the community that we are open to new ways in which taxicab services are being provided, and I do think we should explore putting in place modifications in our taxicab regulations that would allow for this business model. But - and this is a big but - in doing that I think it's as important to recognize that services like Lyft and Uber, are in fact taxicab services, and they need to be treated as taxicab services."

"So whatever rules we put in place to allow for this new business model need to make sure that we have basically a standard set of rules, particularly when it comes to things like licensing requirements, inspection requirements, insurance requirements. So that we basically have a level playing field for all providers of taxicab services, and we don't have two sets of rules," Sipress said.

Hobbs defended his proposed ordinance, differentiating transportation network companies such as Uber and Lyft from traditional taxi services, but he noted that it would still hold the businesses to similar standards.

"While they both provide similar services, I think they're two different entities, and currently we have something that would allow transportation network companies to operate with some safeguards but in a way that they already do in other cities across the country," he said.

The proposed ordinance would not require rideshare companies to post their fares days in advance, as taxi operators must, but would mandate that estimated fares be disclosed in advance of travel to all customers.

Hobbs said the ride service platforms rely on algorithms that would be difficult to regulate and that allow for charges to surge during periods of peak demand.

"I think that operating in a free market, it actually provides a competitive advantage to our cab companies which have to post their prices in advance. ... So if surge pricing is going so high people are going to say: I'm not going to pay three or four times the regular rate. I'm going to look at a cab company," he said.

Hansen agreed, saying: "If people get burned by Uber, that's a competitive advantage for us, and let the chips fall where they will. I just want there to be an even playing field."

To that end, Hobbs said he proposes a number of requirements designed to set transportation network companies on an equal footing with conventional taxi services.

Rules of the road

Hobbs' ordinance would require all rideshare vehicles to be licensed by the city, and suggested the fee for this license should be consistent with those charged to license cabs, now $154 per year, or $176 with additional fees tacked on.

Drivers also would undergo background checks. Any of the following convictions within the past seven years would disqualify a candidate: driving under the influence of drugs or alcohol, fraud, sexual offenses, use of motor vehicle to commit a felony, criminal property damage, theft, violence or making terroristic threats.

Qualified drivers would need to be at least 19 years old and also would need to have relatively clean driving records, with no more than three moving violations within the past three years.

Rideshare vehicles would need to be no more than 10 years old, and they would be subject to annual inspections by mechanics certified by the National Institute for Automotive Service Excellence.

As for insurance, vehicles would need to carry at least $250,000 of coverage for injury or death of any individual in an accident, $500,000 for multiple individuals injured or killed in an accident and $100,000 for property damage caused as the result of an accident.

Under the proposed ordinance, rideshare companies would respond only to bookings. They could not be hailed, and they could not use taxi stands.

Hansen noted that any of the proposed rules will be meaningful only so long as they carry stiff penalties and are actively enforced.

While somewhat apprehensive, Hansen said he doesn't oppose rideshare services entering the Duluth market.

"I'm all for Uber, if there's a level playing field. I believe this industry is a growing industry. I've seen it grow since I started. Twenty years ago, when I was in college, nobody took a taxi to save their life. Now, these college kids take taxis two, three, four times a day sometimes. It's growing like crazy. So I believe that rideshares like Uber and Lyft are going to help push that forward. It will be taxis and rideshares together, but there will be room to grow," he said.