With New Rules, Will Uber, Lyft Stay in Austin?

^{Editor's note: This story has been updated throughout.}

The future of popular vehicle-for-hire services Uber and Lyft in Austin was up in the air early Friday morning after the city council voted 9-2 in favor of an ordinance aimed at regulating the firms more like traditional taxi companies.

After nearly five hours of debate, the council voted to require drivers for vehicle-for-hire apps like Uber and Lyft to pass fingerprint-based background checks, defying warnings by the companies that they would likely leave the city under such a regulation. The ordinance goes into effect on Feb. 1 but the companies will have the chance to get their fleets into compliance in phases over the course of 12 months. 

The move by Austin leaders represents the latest fight between the fast-growing vehicle-for-hire industry and Texas cities, several of which have struggled to find a balance between allowing the popular smartphone-based services to operate while addressing concerns about fairness and safety — those often brought up by traditional cab companies, which operate under more onerous regulations.

A packed Austin City Hall sat waiting late into the night for the council to take up the proposed ordinance. As they have in similar battles with other cities, Uber and Lyft all but promised to leave Austin if the proposal passes. The companies made good on a similar threat in San Antonio, only to both later return under a pilot program that made fingerprint-based background checks voluntary for drivers.

But Austin's higher profile as the state’s capital, a tech-friendly mecca and the home of one of the largest college campuses in the country, means the standoff could have a wider impact. Councilmembers Ellen Troxclair and Don Zimmerman voted against the proposal.

Both Uber and Lyft operate in more than a dozen Texas cities, many in which the regulatory environment for the companies’ services remains unsettled. The two companies are also expected to expand service to other Texas cities.

Just over a year ago, Austin passed a temporary ordinance allowing vehicle-for-hire apps to operate legally with few restrictions. Over several months, Councilwoman Ann Kitchen has led an effort to pass a permanent ordinance requiring the vehicle-for-hire apps to follow similar regulations as traditional taxi companies. The most contentious issue has been the kind of background checks drivers for both types of companies must undergo. 

In most Texas cities where Uber and Lyft operate, the cities allow the companies to handle the background checks of their drivers. Officials with both companies have criticized fingerprint requirements as overly burdensome and unnecessary. Drivers working fewer than 20 hours a week are critical to the reliability of their services, they say, and requiring them to visit an office to be fingerprinted dissuades many from signing up.

“If the current proposal is adopted, Austin will become the only major city in the U.S. without ridesharing,” Uber spokeswoman Debbee Hancock said earlier this month. The company also launched a "Kitchen View" setting on its app in Austin, which removed the company's fleet of cars from view and replaced it with an offer to request a horse-and-buggy ride.

When asked if Lyft would stop operating in Austin if the ordinance passes, spokeswoman Chelsea Wilson said, “We do not operate in any market that requires drivers to be fingerprinted.”

Kitchen argued that the companies could thrive under her ordinance.

“I think this is a community that would show you that the drivers would be fingerprinted and would want to participate," Kitchen told a Lyft official Thursday evening.

Austin Mayor Steve Adler and several council members expressed frustration that they were making policy with a threat over their heads. Yet they were also worried about the potential safety problems associated with maintaining the status quo or changing current regulations.

“I don’t like any of these choices,” Adler said. “Ultimately our goal is to not keep any particular company here or not here.” 

Several members of the council said they were worried that the loss of Uber and Lyft would mean an increase in drunk drivers on the road. Austin Police Chief Art Acevedo echoed that concern, telling the council that it would be ideal if Uber and Lyft’s background checks were expanded, but stressed that his bigger concern is Austin residents losing a popular transportation option, particularly late at night.

“A lot of sexual assaults happen in the city of Austin because we’re not getting people that are in our vulnerable population out of the downtown area and in their homes,” Acevedo said.

While both companies have said arranging fingerprint-based background checks of drivers is too burdensome, they took different approaches to that issue in Houston. Once the city began fingerprint-based background checks of the vehicle-for-hire app drivers last year, Lyft pulled out of that city. Uber chose to stay but has continued to complain about the city’s ordinance and to argue that it has kept many potential drivers from signing up.

Kitchen asked Uber Executive Adam Blinick why the company was still operating in Houston.

“Houston has been a very difficult city for us to operate” in Blinick said. He declined to say whether the company had plans to leave the city.

Houston officials have criticized the third-party background checks companies like Uber use in other cities as insufficient in catching convictions from all 50 states and ensuring that drivers are who they say they are.

Later in the evening, Alex Heim with the city of Houston told council members that his city has not seen any evidence that Uber cannot sign up enough drivers to meet demand because of its fingerprint requirement. He also read a letter to the council from Houston Mayor Annise Parker urging Austin leaders to adopt fingerprint-based background check requirement for drivers for Transportation Network Companies, or TNCs.

“In our experience over the past year, it has proven critically important to require TNC drivers to undergo a fingerprint-based FBI background check before licensure,” Parker wrote. “In the first ten months after Houston’s ordinance went into effect, our fingerprint-based FBI background check found that several applicants for TNC driver’s licenses — who had passed a commercial criminal background check — had a prior criminal history.”

Supporters of Uber and Lyft argued that fingerprint-based checks are not perfect and can sometimes include arrest information for charges that were later dropped.

A thorny set of issues colors the debate beyond safety. Traditional Yellow Cab-style companies in Austin and most other Texas cities are limited in how many vehicles they can have on the road and are strictly regulated in terms of the fares they can charge. Many cities also require those firms to have some wheelchair-accessible vehicles in their fleets. Uber and Lyft constantly adjust their fares based on demand and do not face requirements in most cities to provide wheelchair-accessible service.

“They can raise their prices when they want to but I can only charge what the city set my meter to charge, and you’re telling me that’s a level playing field?” said David Passmore, president of the Taxi Drivers Association of Austin.

Supporters of Uber and Lyft counter that many of their users find their services more convenient than traditional cabs. Uber has offered research showing that its service reduces drunk driving in cities in which it operates. 

“We’re seeing behavior changes,” said Uber Chief Adviser David Plouffe in October. “We’re seeing young people who wouldn’t even think about getting behind the wheel if they’re going to go have a drink or go have a couple of beers. Why, if you can press a button and get a ride in a few minutes?”

Disclosure: Uber and Lyft are corporate sponsors of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.