THE METAMORPHOSIS OF FOR HIRE GROUND TRANSPORTATION BUSINESS, - - PowerPoint PPT Presentation

The Evolution of Limousine, Shared­Ride and Bus Services in New York and Beyond! Professor Matthew W. Daus, Esq.

THE METAMORPHOSIS OF FOR­HIRE GROUND TRANSPORTATION BUSINESS, REGULATION & TECHNOLOGY

Presented By

Professor Matthew W. Daus, Esq.

 Former Commissioner/Chairman of the NYC Taxi and Limousine Commission (TLC)  President, IATR  Distinguished Lecturer, UTRC  Partner & Chairman, Transportation Practice Group Windels Marx Lane & Mittendorf, LLP  President, COTA

Contact: mdaus@windelsmarx.com 156 West 56th Street | New York, NY 10019

• T. 212.237.1106 | F. 212.262.1215

 Former Commissioner/Chair of Taxi & Limousine Commission (TLC) for over 8 years, and General Counsel for over 5 years  CEO of agency with 450+ employees and $29 million budget  6 ground transportation industries, with multi‐billion dollar revenues, and over 150,000 licensees  Largest and most active regulator in world, transporting 500 million passengers annually  Medallion auctions raised <$200 Million for NYC; values tripled from $200K to $750K during tenure, and has continued to rise to over $1,000,000 in 2013  Longest serving agency head serving 2 Mayors (Giuliani & Bloomberg)

 The International Association of Transportation Regulators (IATR) is a growing peer group of taxi, limousine and for‐hire transportation regulators, dedicated to improving the practice of licensing, enforcement and administration of for‐hire transportation through the sharing of information and resources.  Member jurisdictions are:

 Taxi commissions and committees, solely responsible for the governance and control of taxi licensing and enforcement  Police departments and other law enforcement agencies with responsibility for taxis  Consumer protection and transportation departments of cities and regions, with responsibility for public safety and service quality  Airport authorities  State and federal agencies responsible for limousines and other motor carriers, where there are cross‐ jurisdictional issues

 The City University of New York (CUNY) Transportation Research Center (UTRC) is one of ten

• riginal University Transportation Centers established in 1987 by the U.S. Congress.

 These Centers and their faculty members provide a critical link in resolving national and regional transportation problems while training the professionals who address our transportation systems and their customers on a daily basis.  It represents the U.S. Department of Transportation’s Region II, which includes New York, New Jersey, Puerto Rico and the U.S. Virgin Islands. Functioning as a consortium of twelve major universities throughout the region, the UTRC is located at the CUNY Institute for Transportation Systems at The City College of New York, the lead institution of the consortium.  The UTRC supports research, education and the transfer of technology in the field of transportation.

University Transportation Research Center

 Our Transportation Practice Group is dedicated to serving ground transportation and related businesses.  Our services include

 helping clients comply with the complex legal and regulatory framework overseen by national, state, and local taxi and limousine regulators; transportation and motor vehicle departments; and

• ther government agencies;

 assisting clients in obtaining required government approvals for products, services, and procurements;  representing clients in disputes with regulators and private entities;  drafting driver affiliation and base affiliation agreements;  negotiating and drafting transportation business purchase and sales agreements;  counseling clients on corporate organization and formation;  advising clients on worker classification (such as classifying drivers as independent contractors) and related issues, including the structuring of agreements, policies, and codes of conduct;  advising clients on avoiding tort liability, minimizing sales tax and related liabilities, and insurance coverage review; and  providing strategic legal, financing, and market advice to transportation businesses.

 COTA is a limousine and black car trade associations coalition which aims to advance, support and preserve the integrity and economic viability of the for‐hire ground transportation industry;  to promote environmental sustainability;  to foster job growth and inter‐modal transportation solutions;  to support reasonable government regulation; and  to enhance customer service and explore viable advances in technology to assist businesses, passengers and the industry.

Evolution of the FHV Industry

THE EARLY YEARS: 1907 ‐ 1935

 New York City’s gasoline‐powered taxi industry originated in 1907 when Harry N. Allen fielded 65 French‐ imported automobiles. Providing faster service and using mechanical meters to more accurately compute the fare, the new service quickly replaced horse‐drawn hansom cabs. With cab stands at major hotels, Allen quickly expanded to 700 cabs.

Allen left the taxi business in 1908 in the wake of a bloody seven‐week drivers’

• strike. His innovations caught on, however, as did a new word he coined – taxicab.

The taxi industry grew quickly to 15,000 vehicles in 1923, led by several large fleets such as Checker (3,750 taxis), Yellow (3,000 taxis) and the National Transportation Company (1,500 cabs).

During the 1920s and 1930s, easy entry into this all‐cash business led to an oversupply of taxis, resulting in traffic congestion, fare‐cutting wars, low driver wages, inadequately‐insured vehicles, and other unsafe and sometimes illegal activities. The Great Depression created an influx of unemployed workers which worsened these problems, with the number of cabs increasing to 21,000 in 1931.

To address problems of

• versupply, in 1937 the

City enacted an ordinance sponsored by Alderman Lew Haas that froze the number of taxi licenses at 13,595 – the number then

• utstanding.

 The Haas Act cap remained in place throughout the post‐World War II era with

• ne exception.

 In 1945, the City Council issued 183 additional medallion licenses to returning veterans who had given up their medallions during the war.

 The cap on medallions became an impediment to the taxi industry’s ability to meet New York City’s growing transportation needs.  With the post‐war boom, taxi drivers increasingly serviced Manhattan’s growing demand, with Manhattan‐originating trips accounting for 77.7% of all trips in 1963.

Concentration of taxis in Manhattan led to the creation of neighborhood car services.

The map shows the average number of pickups Jan. – March, 2009.

 To fill the need for cab service in the boroughs

• utside Manhattan, neighborhood car services, or

liveries, began to operate outside the Manhattan central business district, especially in New York City’s lower‐income neighborhoods.  Though not regulated by the City government, these

• perations were legal provided they operated only by

pre‐arrangement.  Liveries were a source of contention from their birth. While many elected officials defended them as community businesses providing needed transportation, the taxi industry attacked them as unregulated, unsafe, and encroaching on taxis’ rights.

The Evolution of the For‐Hire Industry

 Despite the controversy with the taxi industry, the new car service industry grew

• rapidly. The number of car service vehicles increased from 2,500

in 1964 to 9,300 in 1971. Thus, in 1971 the number of taxis and liveries combined (21,000) matched the previous high tide of the industry exactly four decades earlier.

• In part to address these livery issues, the City Council in 1971 created the Taxi

and Limousine Commission, although the TLC did not finally gain clear jurisdiction

• ver “for‐hire vehicles”

until 1987.

The Evolution of the For‐Hire Industry

 In 1985, the TLC ‐‐ during the administration of Mayor Ed Koch ‐‐ addressed the perceived unavailability of cabs to street hail customers by banning the use of radios and dispatchers for yellow cabs to compel them to serve more on‐street customers.  This lead to the creation of prearranged services by black cars and luxury limousines.

The Evolution of the For‐Hire Industry

 In the late 1990s, stretch limousines became immensely popular.

The Evolution of the For‐Hire Industry

 In 2001, the City law was amended to give the TLC jurisdiction over vehicles with 20 or fewer passengers.

The Evolution of the For‐Hire Industry

 Within the past 6 years, large SUVs replaced the stretch limousines, except for some specialized events like proms and weddings.

The Evolution of the For‐Hire Industry

Definitions

 FOR‐HIRE VEHICLE (FHV): Defined in City law as a vehicle seating fewer than twenty or fewer passengers (in addition to the driver) and providing service after prior arrangement. Under local law, FHVs are prohibited from picking up street hails.  For‐hire vehicles are required to be affiliated with FHV bases, which are responsible for handling any complaints about the drivers or vehicles. They charge fares based on zone systems, by the hour or possibly by the mile; they may not use meters.  The FHV industry is segmented into livery services, black cars and limousines.

 Livery Service : The segment of the for‐hire vehicle industry that primarily serves local or neighborhood trips. They act as a de facto taxicab service for customers in the Bronx, Brooklyn, Queens, Staten Island and northern part of Manhattan.

Definitions

Definitions

 Black Cars: A segment of the for‐hire vehicle industry; primarily serves business clientele with luxury cars (e.g., Lincoln Town Car).  Under TLC rules, black cars are defined as FHVs that operate from bases

• rganized as either a franchise or cooperative, and where at least 90% of

customers pay by a method other than cash.

 Limousines: A segment of the for‐hire vehicle industry that had generally used stretch vehicles. "Luxury limousines" are defined in TLC rules as FHVs where passengers are charged on the basis of garage to garage service, payment is by

• ther than direct cash payment by the customer, and at least

$500,000/$1,000,000 insurance is carried.

Definitions

 Commuter van: a privately‐owned vehicle with a seating capacity of 9 to 20 passengers. Colloquially known as “Dollar vans,” the vehicles typically provide transportation into, out of, or within New York City: (1) on a prearranged, regular daily basis, (2) over non‐specified or irregular routes, and (3) between a zone in a residential neighborhood and a location which will be a work related central location, a mass transit or mass transportation facility, a shopping center, recreationalfacility or airport.

Definitions

Technology in the For‐Hire Industry

 From a two‐way radio…

 To state of the art dispatch software system…

Technology in the For‐Hire Industry

 The for‐hire industry was the first one to use computerized dispatch services.  The industry moved from two‐way radios to dispatch software enabled by GPS and data information management systems (DIMS).

The Evolution of Technology in the For‐Hire Industry:

Smartphone App Disruption

Run the app and locate a service… Download an app…

Payment via text, email

• r other payment

processing devices.

How Do Taxi & Limo Apps Work?

Book a Vehicle…

 Prearrangement or Electronic Street Hail?  Confusion between Limo & Taxi Modes  Safety & Accountability (Insurance/Drivers)  Service Refusals  Fare Notice & Transparency  Overcharging (Demand Pricing)  Smartphone Apps = Taximeters

Smartphone App Legal & Policy Issues

Rogue Apps Report and Model Regulations

 In June 2012, we issued a Rogue Apps Report which found numerous regulatory and consumer concerns with the smartphone apps in ground transportation.  The IATR Smartphone Apps Committee was formed to address these concerns and remove loopholes.  At its meeting in Washington, D.C. in November 2012, the IATR held an international public hearing to review the draft regulations and receive comments.  The comment period was extended to March 31, 2013 to allow for input from industry stakeholders  The final Model Regulations were issued at the IATR conference in September 2013.  *The Rogue Apps Report and the Model Regulations can be found at www.windelsmarx.com.

BATTLE AGAINST ROGUE APPS BATTLE AGAINST ROGUE APPS The rogues are mutating The rogues are mutating The rogues are mutating The rogues are mutating into illegal ridesharing services into illegal ridesharing services into illegal ridesharing services into illegal ridesharing services

Battle Against Rogue Ridesharing Apps

A Comprehensive Report on the Impacts of Ridesharing and its Legality Produced by Windels Marx Team.

http://www.windelsmarx.com/resources/documents/Ridesharing%20%20Report.pdf

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Austin, T X

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Boston, MA

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Cambr idge , MA

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Chic ago, IL

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Columbus, OH

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Color ado

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Mar yland

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Miami, F L

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Minne sota

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Ne w Yor k

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Philade lphia, PA

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San F r anc isc o, CA

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Se attle , WA

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Washington, DC

Growth of taxi and livery industries, 1907‐2006

Source: Schaller Consulting New York City Taxicab Fact Book

The For‐Hire Industry Today

 As of December 2012, there are 41,062 livery, black cars and limousines registered in New York City.

 As of October 7, 2013, Uber has 2,920 vehicles affiliated with its 4 TLC bases, which is more than 16% of all the black cars and limousines licensed by the TLC.

Source: New York City Taxi and Limousine Commission 2012 Annual Report

From a Stretch Limo to High‐end Vans

For‐Hire Industry Today

 Today, black car and limousine companies are mixed fleets.  They affiliate with small luxury limousine owners/ drivers.  Their fleets include sprinter vans, buses and sedans. Diversified vehicles/fleets

Maybach, Mercedes‐Benz, BMW, Audi, Cadillac Escalade SUV’s, Lincoln Navigator SUV’s, Stretch Limousine, Lincoln L‐Series Sedans, Luxury Coaches, Mercedes Sprinter Vans, Ford Econoline Vans, Hybrid and Alternative Fuel Vehicles.

National and International Affiliation Networks

 Mixed driver classification (some have independent contractors while others have employees).  Most For‐Hire Vehicle drivers are classified as independent contractors.  Recently, the Internal Revenue Service (“IRS”) has stepped‐up enforcement of rules regarding independent contractors.

For‐Hire Industry Today Worker Classification

 To address independent contractor misclassification, the Federal Department of Treasury, Department of Labor (“DOL”) and State agencies have formed a joint task force.

 A company engaging an independent contractor is not required to pay federal employment tax on that worker.  The Company need not withhold income and payroll taxes or issue a W-2 form.  The independent contractor is responsible for obtaining his or her own insurance coverage.

For‐Hire Industry Today Worker Classification

The Status of NYS Transportation Law

 Overlapping jurisdiction  Vague definitions and gray areas  No coordinated regulation  Enforcement overlap of the federal government, NYS, and local government

The Status of NYS Transportation Law

 The United States Department of Transportation (USDOT ) has a mission to “serve the United States by ensuring a fast, safe, efficient, accessible, and convenient transportation system that meets the vital national interests and enhances the quality of life of the American people."  Companies that operate commercial vehicles transporting passengers or hauling cargo in interstate commerce must be registered with the Federal Motor Carrier Safety Administration (“FMCSA”) and must have a USDOT Number.  The USDOT Number serves as a unique identifier when collecting and monitoring a company's safety information acquired during audits, compliance reviews, crash investigations, and inspections.

Federal Motor Carrier Safety Act

 The Federal Motor Carrier Safety Administration (FMCSA) was established within the Department of Transportation on January 1, 2000, pursuant to the Motor Carrier Safety Improvement Act of 1999 (49 U.S.C. 113).

 Activities of the Administration contribute to ensuring safety in motor carrier operations through strong enforcement of safety regulations; targeting high‐risk carriers and commercial motor vehicle drivers; improving safety information systems and commercial motor vehicle technologies; strengthening commercial motor vehicle equipment and operating standards; and increasing safety awareness. Formerly a part of the Federal Highway Administration, the Federal Motor

Carrier

Safety Administration's primary mission is to prevent commercial motor vehicle‐related fatalities and injuries.

 Requirements for Inter‐State Carriers Under the New Regulations

 US DOT Number  Motor Passenger Carrier Authority  Compliance with all sections of 49 CFR parts 390, 391, 392, 393, 395, 396, and 385

Federal Motor Carrier Safety Act

 The Port Authority of New York & New Jersey conceives, builds, operates and maintains infrastructure critical to the New York/New Jersey region's trade and transportation network.  These facilities include America's busiest airport system, marine terminals and ports, the PATH rail transit system, six tunnels and the bridges between New York and New Jersey, the Port Authority Bus Terminal in Manhattan, and the World Trade Center.  The Port Authority has the right under state law to govern concessions and franchises under its property, that includes shared rides to and from the airports and bus terminals.

 New York State Department of Transportation (NYSDOT)

 Responsible for coordinating and assisting in the development and

• peration of transportation facilities and services for highways, railroads,

mass transit systems, ports, waterways and aviation facilities.  Provides oversight and regulation of intrastate transportation including the safe operation of bus lines, commuter railroads and subway systems that are publicly subsidized through the Public Transportation Safety Board.

Types of NYSDOT Passenger Operating Authority

 Common carrier: A Common Carrier certificate may be issued to carriers that serve the general public and charge individual fares. Some examples are:



Bus Lines  Ambulette

• r Transit Disabled Services

 Airport Services  Contract carrier: A Contract Carrier permit may be issued to carriers who have an agreement (contract) with a person or organization that allows for the transportation of an individual or group at a fixed price. (i.e., contract with health care facility to transport clients at a fixed rate)  Charter or special party carrier: A Charter or Special Party Carrier permit may be issued to carriers who contract with individuals or organizations to transport for a fixed charge and under a single contract, passengers who are travelling together as a group within New York State.

 The New York City Department of Transportation (NYC DOT ) is responsible for the management of much of New York City's transportation infrastructure.  NYC DOT is also responsible for authorizing commuter van with a seating capacity of 9‐20 passengers on a prearranged regular daily basis, over non‐specified or irregular routes between a residential zone and a work related central location, a mass transit facility, a shopping center or recreational facility within the City of New York.  The NYC TLC makes a determination as to whether or not the applicant meet the fitness requirements to provide the service, while the NYC DOT will decide whether or not there is a need for the service.

 New York City Taxi & Limousine Commission (“TLC”)  Responsible for ensuring that New Yorkers and visitors to the City have access to taxicabs, car services, and commuter van services.  Regulates for‐hire transportation services provided within New York City.  The TLC regulations define a for‐hire vehicle (“FHV”) as a motor vehicle carrying passengers for hire in New York City, with a seating capacity of 20 passengers or less, not including the driver, other than a taxicab, coach, wheelchair accessible van, commuter van or an authorized bus.

 Jurisdiction is based on : Seating capacity Vehicle weight Vehicle usage

The Status of NYS Transportation Law

NYC DOT: Regularly scheduled bus service into or from the city NYS DOT: Vehicle that carries more than 10 persons and which weighs over 10,000 lbs. pounds PORT AUTHORITY: If vehicle has a contract or concession agreement with airports US DOT: If providing interstate commercial transportation

• Bus

NYS DOT: Intra city van service/common carriers transporting disabled persons/vans to/from airport NYC DOT: Vehicle with a seating capacity of 9 – 20 passengers/ prearranged service on a regular daily bases US DOT: Interstate commercial transportation PORT AUTHORITY: If vehicle has a contract or concession agreement with airports

• Vans

NYC TLC: For‐hire vehicle w/ a seating capacity of 20 passengers or less, not including driver US DOT: Interstate commercial transportation NYSDOT: vehicles passenger capacity

• f 15 or more and mixed

fleet of sedans and i.e., vans & buses, subject sedans to NYSDOT regulatory jurisdiction

• Limousines/Sedans

 Intra‐city Taxi or Livery Service is generally exempt from NYS DOT regulation if

 Transportation is performed in vehicles with seating capacity of 20 or less passengers per jurisdiction of a city with a population of over 1mm (i.e., New York City) when wholly within city, except vehicles with seating capacity of 15 or more are subject to § 140 (Safety Requirements)

 Sedans and station wagons were formerly exempt from NYS Transportation Law.  However, now, if a carrier uses a mixed fleet of sedans and station wagons along with larger size vehicles (vans and buses) in regulated transportation, the sedans and station wagons are subject to NYS DOT regulatory jurisdiction.

Overlap of Authorities

RIDE ACT

 Real Interstate Driver Equity Act of 2001 prohibits a State

• r political subdivision or an interstate agency of two or

more States from enacting or enforcing any law, rule, or regulation requiring a license or fee on account of the fact that a motor vehicle is providing pre‐arranged ground transportation service, if the motor carrier providing such service:

 meets all applicable registration and vehicle and intrastate passenger licensing requirements; and  is providing such service, including intermediate stops in another State without taking on new passengers, pursuant to a contract for interstate and intrastate passenger travel.

 The RIDE act does not prohibit or restrict an airport, train,

• r bus terminal operator from contracting to provide

preferential access or facilities to one or more providers of pre‐arranged ground transportation service.

Case Study

 Question: Which agencies regulate an

• ut‐of‐state operator

with a contract with the VA Hospital in the Bronx to transport veterans to and from medical appointments?

First Case ‐

First Case ‐ An out‐of‐state operator is "Welcomed" to New York...

Answer...  The NYS DOT requires that the company obtains

• perating

authority since it is transporting passengers within New York State through its vans.  THE TLC does not have jurisdiction because the only contact with NYS is done through this contract, and the operator is not for‐hire. Had the operator also

• ffered services to the public within New York City, the TLC would require that the
• perator and its vehicles also obtain licenses since its vehicles had a seating

capacity of 20 or fewer passengers.

Case Study

 Question: If a shuttle service with an existing Port Authority airport concession wants to expand its operations to also operate with point‐to‐ point service within NYC, is the concession with a NYS DOT permit enough?

Case Study

Second Case: Shared Ride Services

Answer...

 The existing Port Authority concession is a special permit to

• perate between the NYC airports and points within NYC, so if

the service is expanded to include a trip between the airports and Buffalo (or other locations beyond Brooklyn or Queens, etc.) then the operator must obtain NYS DOT operating authority as a common carrier.  Since the operator has vehicles with a seating capacity of 20 or fewer passengers, the company would also need TLC licensure if it would perform point‐to‐point for‐hire service that did not include the Port Authority (i.e., neither to nor from an airport). For example, a group books the shuttle to travel from Brooklyn to a baseball game at Yankee Stadium or Citi Field.

Case Study

Issue:

 Golden Touch was the winning bidder to provide high volume motor coach service for passengers to and from NYC airports pursuant to a permit granted from the Port Authority.  Private One, which previously possessed the permit from the Port Authority, sued Golden Touch alleging that Golden Touch did not possess the NYC franchise authorization to operate as a regular route common carrier upon City streets, and that the Port Authority cannot legally authorize Golden Touch’s services.

Case Study

Third Case: We found the Golden Touch

Private One of NY, LLC v. Golden Touch Transportation, Inc., 2011 NY Slip Op 50789(U) [31 Misc 3d 1221(A)]

 The Court found that the operation of the airports is within the sole discretion of the Port Authority, and its decisions relative to the operation of the airports are controlling and conclusive.  In addition, the Court agreed that the NYS DOT has exclusive jurisdiction over Golden Touch’s

• perations as a common carrier of passengers by

motor vehicle since it had been issued a permit by the Port Authority to operate at an airport, and that no NYC franchise is required to operate under the Port Authority permit. In sum, the NYC Administrative Code’s franchise requirement is preempted by NYS Transportation Law.

Case Study

Private One of NY, LLC v. Golden Touch Transportation, Inc., 2011 NY Slip Op 50789(U) [31 Misc 3d 1221(A)]

Fourth Case: Border Wars

 Question: Can New Jersey (or

• ther state) exercise jurisdiction
• n

a NYC‐based company

• perating interstate?

Case Study

 It depends....  If the New York vehicle is operating for‐hire point‐to‐point intrastate, then New Jersey (or Connecticut etc.) will be able to apply its rules to the vehicle.  If the operator is only operating interstate (with no point‐to‐point service in NJ) then the operator may be OK, as log as it meets the standards of the Real Interstate Driver Equity ("RIDE") Act.  The RIDE Act covers continuous trips. The vehicle may have an “intermediate stops” within another state. An intermediate stop means a pause in the transportation, but the driver may not provide transportation to another person.

Case Study

Our services…

 Our firm represents a diverse group of clients in the for‐hire transportation industry.  The above cases are only a sampling of the issues for which we helped our clients navigate the complex and complicated network

• f transportation laws and

regulations.

Thank you!