EXCLUSIVE: Leaked Memo Shows Houston Rideshare Ordinance Will Cost Taxpayers $530,000 Annually

Houston, October 31, 2014 – Benswann.com has obtained an “Interoffice” memo from the City of Houston’s Administration of Regulatory Affairs to Mayor Annise Parker that details the high cost of Houston’s recently passed ordinance on ridesharing services, also known as Transportation Network Companies (TNCs).

The memo, provided by the Houston Republican Liberty Caucus, is dated October 27, 2014 and described as “a summary of our preparations to date, the TNC permitting and licensing process, TNC concerns with the process, and our response.”

The city is making preparations for the implementation of changes to Chapter 46 of the Houston Code of Ordinances which goes into effect on November 4, 2014.  The ordinance was passed by Houston City Council on August 6th . Uber and Lyft were outspoken in their opposition to the new changes. TNC’s such as Uber and Lyft allow users to search for rides via an app on their cellphone. When the companies initially arrived in Houston in February they were operating illegally, according to the city. The ordinance was aimed at helping the companies operate legally alongside traditional taxis.

The new provisions of the ordinance will require any TNC to complete driving and background checks, as well as car inspections. Lyft says the company already performs those checks, without using taxpayer money. In addition, drivers who want to participate will be required to submit to fingerprinting, government drug tests, medical exams and other processes that Lyft calls “inconvenient”. The company believes the changes will force applicants to drive to multiple locations and the costs could be between $100 to $250 per driver, effectively creating costly barriers to entry for potential drivers.

According to the memo, the Administration and Regulatory Affairs will have to hire “temporary employees to assist with processing applicants”. The cost is estimated at $45,000. The ARA is also “adding four customer service personnel and six enforcement personnel” to manage the workload. This is estimated at $530,000 per year.  In order to handle the workload the ARA will be “offering extended customer service hours”. The overtime costs are estimated at $12,000.

This means the initial cost to implement this new program is around $587,000 dollars and an annual cost of $530,000 to the tax payers of Houston. A statement from Lyft called the City of Houston’s licensing scheme “onerous” and “incompatible with our peer-to-peer model.”  Joshua Connelly of the Houston Republican Liberty Caucus says the taxi lobby in Houston supported the ordinance because it restricted competition.

” This is exactly what the taxi cartel wanted, increased regulatory costs and barriers to entry in a move to restrict competition. If the ordinance remains as written, the entrenched taxi industry has won.”

As the memo itself notes, “the requirements that underlie their (Uber and Lyft) concerns were included in every Chapter 46 presentation to City Council and stakeholder discussion since February 2014.” Despite the objections from the TNC community the city has done little to address these concerns.

Under the section titled “TNC Concerns” number five lists “Vehicle Identification Numbers” as a concern. The TNC provisions in Chapter 46 now mirror the other vehicle-for-hire operators requirement that VIN numbers of vehicles be provided to the city. Currently Uber and Lyft does not collect that information and “believe providing it to the City is overly onerous.” Despite these objections the memo concludes that going forward TNCs will be required to comply.

The main complaint the document outlines is that applicant drivers must go to several different physical locations in order to complete the process. These include a drug screening facility, a medical facility for a physical, a fingerprinting scanning facility, Municipal Courts for warrant check and the Houston Permitting Center. This extensive process does create a barrier of entry for an individual who may have originally seen Uber and Lyft as an easy way to make extra cash but cannot afford the time or money needed to complete the process.

These new regulations seem to be having a chilling effect on ridesharing companies working in Houston. As the memo points out, as of October 27, less than a week before the ordinance goes into effect, the city has “received no applications from the TNCs or their drivers.”  Lyft has gone as far as saying the company will leave Houston if the ordinance does not change.

The high cost and the unintended consequences are another example of what happens when government interferes in the open market. Free individuals should have the right to take rides from anyone they voluntarily choose without fear of ticketing or arrest. If Houston does not act fast this ordinance will end up costing taxpayers over $500,ooo a year and driving ridesharing services away from Houston towards friendlier cities.