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Regulating Uber, Lyft, and Other Transportation Network Companies


September 7, 2016 by Byron Katsuyama
Category: Planning , Business Licenses and Taxes

Regulating Uber, Lyft, and Other Transportation Network Companies

We are receiving more questions about the growing presence of transportation network companies (TNCs), like Uber and Lyft, in Washington communities, and we've begun to monitor local, regional, and state regulatory responses. This blog reports on some of the initial regulatory approaches we are seeing, including adoption of local TNC ordinances by individual cities and counties, some regional approaches based on interlocal agreements, and at least one effort to adopt a statewide regulatory framework.

What Are TNCs?

Transportation network companies are companies that use a digital network or software applications to connect passengers with TNC drivers for the purpose of providing a prearranged ride for a fee. While they are most commonly known as “ridesharing” services, many local ordinances use the term “transportation network company” to distinguish them from more traditional types of “for-hire” vehicle services like taxicabs.

TNCs like Uber and Lyft have emerged only recently but have been growing rapidly in size and popularity. Uber, the largest TNC, was founded in 2009 in San Francisco and now operates in hundreds of cities around the world.

Where Are They Operating?

In Washington, Uber’s website says they are operating in Bellingham, Seattle, Spokane, Tacoma, Vancouver, and Thurston County, but they are also known to be operating in King, Pierce, Snohomish and Kitsap Counties, and in cities of Olympia, Tumwater, Lacey and Yelm. Lyft’s website lists Everett, Kent, Seattle, Spokane and Vancouver, as “available Lyft cities” but their presence also likely extends to surrounding communities as well. If TNCs are not already operating in your jurisdiction, they may be there soon.

Public Policy Questions and Concerns

The rapid growth of TNCs has raised a number of public policy questions and concerns for local governments, including their impacts on other transportation providers (most notably taxicabs), safety concerns (relating to drivers, passengers and vehicles), and development of an equitable and effective regulatory framework. There is still some question in Washington as to whether TNCs may be best regulated at the local, regional or state level, or some combination of these (or whether they should be regulated at all).

Local Ordinances

A number of Washington cities and counties have adopted local ordinances to regulate TNC services within their borders, beginning with Seattle’s comprehensive TNC ordinance in 2014. As TNCs have grown and begun operating in other parts of the state, more cities and counties have adopted local ordinances, including Bellingham, Olympia, Lacey, Tumwater, Vancouver, Tacoma, and Pierce County.

The city of Spokane entered into separate operating agreements with Uber and Lyft in 2015
as an interim measure while the city reviews its “for-hire” vehicle code, meets with interested stakeholders, and monitors potential amendments to state laws that may impact for-hire vehicle regulations.

Typical Ordinance Provisions

Local TNC ordinances impose a number of mostly safety-related requirements on TNCs, TNC drivers, and their vehicles, such as:

  • Local business licenses
  • Special TNC operator licenses (in some cases)
  • Criminal background checks for drivers
  • Annual vehicle safety inspections
  • Distinctive trade dress or markings on TNC vehicles
  • Liability insurance to protect passengers and drivers
  • Operational requirements and limitations that affect how TNC services are offered (for example, TNC drivers are limited to arranging rides only through the TNC digital network and can’t accept street hails like taxicabs)

Emerging Regulatory Frameworks

Several regulatory frameworks have emerged as cities and counties have begun to adopt local ordinances and work together, where it makes sense, based on the particular needs and circumstances of their communities. While some cities have taken measures or adopted ordinances intended to regulate TNCs primarily within their own borders, others have opted for a regional approach. There has also been some state level activity.

Regional Approaches

Jurisdictions in King, Thurston, and Pierce Counties have adopted regional approaches based on interlocal agreements that provide for uniform regulations and designate one of the jurisdictions to provide central administrative services such as issuing licenses and enforcing rules.

King County's TNC ordinance was, according to the county, intended to mirror Seattle’s regulations. King County has cooperated for many years with the City and Port of Seattle to regulate for-hire vehicle services in a consistent manner within the county, and it also has interlocal agreements with 16 King County cities to provide taxicab and for-hire vehicle licensing services on their behalf. Under the terms of the agreement, each of the participating cities has adopted King County’s for-hire transportation code by reference. The county’s TNC regulations are intended to build on its longstanding regional approach to the regulation of for-hire transportation services.

In Thurston County, the cities of Lacey, Olympia, Tumwater and Yelm have entered into an interlocal agreement to provide for the joint regulation of transportation network companies. The agreement specifies that the parties have adopted “nearly identical ordinances” and authorizes the city of Olympia to license and audit TNCs (and to collect the associated fees) on behalf of the participating cities.

Pierce County’s ordinance requires TNC drivers to obtain “for-hire” vehicle licenses from the city of Tacoma, which are then valid in the unincorporated areas of the county.

State Legislative Activity

There has also been some legislative activity at the state level that resulted in the adoption of statewide minimum insurance requirements for TNCs. ESSB 5550, passed in 2015, requires that all TNC drivers be covered by at least $1 million in liability and underinsured motorist coverage when passengers are in the vehicle. TNCs must also provide coverage at certain specified levels when drivers are logged into the network but have not yet accepted a ride.

An earlier version of the bill (SB 5550) actually sought to create a much more comprehensive statewide regulatory framework for TNCs, including state level permitting and a number of driver, vehicle and operational requirements and limitations, but it failed to gain enough support for passage. The bill, if passed, would have prohibited local ordinances that conflicted with the state act.

What’s Next?

In spite of these activities, it appears that most cities and counties have adopted a “wait and see” attitude, preferring to see how things play out in other jurisdictions and at the state level, or perhaps not feeling any immediate pressure to adopt local TNC regulations. In any event, TNCs have become very popular, so it seems likely that we'll see continued growth in these services across the state.

Have a question or comment about TNC regulation? Leave a comment below, or contact me directly at bkatsuyama@mrsc.org.


MRSC is a private nonprofit organization serving local governments in Washington State. Eligible government agencies in Washington State may use our free, one-on-one Ask MRSC service to get answers to legal, policy, or financial questions.

About Byron Katsuyama

Byron began work at the Center as a Research Assistant in July 1978. He holds a B.A. degree in Political Science from the University of Washington and an M.P.A. from the University of Washington's Evan’s School of Public Policy and Governance. After completing his M.P.A., Byron joined MRSC's consulting staff as a Public Policy and Management Consultant concentrating on municipal administration and policy analysis. Byron is responsible for research in such areas as emerging local government issues, best practices, strategic planning, performance measurement, and local government management. In addition to his consulting duties, Byron also maintains the "Focus" section of MRSC's website and is editor of our "In Focus" and "Ask MRSC" e-newsletters. He also coordinates our HR, Planning, Finance, Government Performance, and Council/Commission Advisors. In his own community of Kirkland, Byron also served for eight years as a member of the city's planning commission. Byron is a member of the Washington City/County Management Association (WCMA) and the International City/County Management Association (ICMA).

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