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Blindsided by Council, Fresno's airport tries to figure out how to sell Uber fee

The decision facing the council was whether to enshrine this fee by approving an amendment to the city’s master fee schedule. Meikle’s proposal was placed on the council’s consent calendar. That’s a list of seemingly routine items that the council usually disposes of with a single voice vote.

A specific consent calendar item gets council review only if a council member asks for it. This is called “pulling” an item.

Meikle in the brief paragraph quoted above touched on about ten key elements in the operation of a complex airport system. Bredefeld asked that the proposed Uber/Lyft fee be pulled. Bredefeld reduced all of Meikle’s complexity and subtlety to something any consumer (or voter) could understand.

Bredefeld said the proposed fee is just another tax – and we’ve already got too many taxes.

As noted earlier, Meikle wasn’t in the Council Chamber on Thursday. Dan Weber, Airports’ assistant director, trooped to the public microphone.

Bredefeld began by engaging Weber and Rudd in a conversation about business licenses. Businesses operating in Fresno must have a business license and pay a business tax. Getting the free-lance drivers of Uber and Lyft up to date with both the purchase of licenses and the payment of taxes has been a challenge for City Hall.

Bredefeld said he is confident Uber and Lyft drivers will fulfill their business-license duty. Then he cut to the chase.

“My problem with this is that we’re then adding on another fee or tax – $3 for the drop-off, $3 for the pick-up – which will obviously be passed on to the customer which will make it more difficult for the drivers in terms of their economics,” Bredefeld said. “That’s my problem. I’m in support of them paying business taxes and I know we collect a lot of business taxes – about $17 million a year throughout the city for all the business taxes, which goes right into the general fund.

“Uber is going to pay that. The business drivers are going to pay that, who are operating under Uber. But I have a problem with these additional charges and fees. I think they’re unfair. I’ve said all along I think we tax too much – on the state level, on the federal level and we’re doing it here. So, I can’t support this.”

Bredefeld made a motion to reject Airports’ proposed drop-off/pick-up fee on Uber and Lyft. Council Member Oliver Baines quickly seconded the motion.

If Weber had been in a boxing match, at this point he’d be deemed by ringside observers as “on his heels.”

Council Member Luis Chavez kept up the pressure.

One of the reasons for the $3 fee is the alleged impact Uber and Lyft are having on the airport’s long-term parking business. Airport officials did a study dating back to 2013.

“Airports experienced a measurable reduction in public parking usage and corresponding revenue equal to $4.64 for each TNC drop-off and pickup,” Meikle wrote in his report to the council.

Chavez asked Weber: “How do arrive at that dollar amount? What’s the criteria for that?”

Weber tried to regain the momentum.

“I’ll explain it in a second,” Weber said, “but if I could say just in general about airport fees and charges: Airports is an enterprise fund. It’s not supported by any taxes. Tax revenues go to the general fund. Airports is obligated by grant assurances to generate revenues through a rate structure that will make it financially self-sufficient. So, by federal regulation, we’re obligated to assess fees for the privilege of operating a business on the airport. The airport is funded by internal revenues as well as by federal grants, and that’s just how the airports operate.

“The $3 fee was established through a number of processes. First, a year ago we agreed to allow the TNCs to operate at no fee so that we could assess the impact on the airport of their operation. And that process and our history in this told us that the negative impact on our parking revenues was an amount which would equate to $4.63 per transaction. We did some sensitivity analysis, compared it with what’s going on across the state, and we settled on $3 as being a fair and reasonable fee.

“If the airport is denied the ability to capture a legitimate revenue stream, then that revenue stream will be lost forever to the airport. We’ve got to be able to capture these revenue streams. We’ve just this past year opened a $2 million ground transportation improvement project which included relocating employee parking out of the parking lot into a new lot to expand our parking by 10%. Now our parking revenues are being negatively impacted. So, we have to have the ability to generate these revenues, whether it’s TNCs or whether it’s landing fees or whether it’s rent.”

Chavez simply wanted a clear answer. The council member interrupted Weber.

“So,” Chavez said, “you did a study based on the other airports of comparable size, the traffic, that sort of thing, right?”

Weber: “We did a survey of all airports in California that have the service. The results of that survey are in the staff report.”

Chavez and Weber got into a back-and-forth about different types of airport fees already established. Weber returned to what he figured was his strongest point.

“The airport doesn’t participate in tax revenues,” Weber said. “The reason we established drop-off and pick-up fees is to address the impact to the airport of this new business model that the TNCs are using. As I mentioned, we calculated that the impact is $4.64 per drop-off and pick-up. And that in itself is not recovered through the $3 fee. The $3 fee just contributes to the overall operation improvements of the airport.”

Weber may have thought charging $3 to offset a $4.64 shortfall was a strong debating point. Council Member Baines disagreed.

You’ll notice a different figure – $4.63 – in Baines’ comments. That’s because early in the hearing the $4.63 figure got bandied about. The staff report says $4.64. For the sake of this story, the lone penny makes no difference.

Baines: “The issues I have are, one, if it really costs $4.63, I’d rather you guys brought an item that was $4.63. And, second, do we charge the taxis?”

Weber: “No, we do not charge the taxis, and that’s a historical thing. Up until the TNCs came up with a new business model and a new way of reaching the customers, the taxi cab activity and hotel shuttle van activity was of such a small amount that it would have cost us much more to try to capture that revenue … the cost would far exceed the revenue. So, we allowed things to continue until such time that it became a significant revenue opportunity, which the TNCs created through their business model. We are establishing, we’ve already put together, a ground transportation program. We are one-by-one implementing fees. We will soon be implementing fees for taxicabs and for the hotel shuttles and so forth.”

Weber at this point went from being on his heels to his knees buckling.

Baines: “Thank you for that explanation. Sadly, I can’t follow that logic – the reason we don’t charge the taxis is because it’s too hard to recover (the money). It’s almost like we’re just going after the low-hanging fruit here.

“I won’t be able to support this item. If we’re not charging the taxis and the shuttle services and what have you, I’m not exactly sure it’s fair to just charge the TNCs because it’s easy, which essentially is what you are doing.

“And I also don’t appreciate the logic of not charging them what it actually costs. You took the effort to do a study about what it costs. Again, from a logical point of view, you said it costs $4.63. To charge them $3 and you’re losing $1.63 according to your own records – that would leave a gap. And at some point you’d be asking the general fund to fill that gap. I wouldn’t have supported it either way, but in the future if you are going to make the effort to do a study and tell us what something costs, then go ahead and feel free to charge what it costs.”

Council Member Paul Caprioglio, an avid boxing fan who stays fit by occasionally getting in the ring, tried to rescue Weber.

In response to Caprioglio’s gentle questioning, Weber explained that the $3 fee would be a fair and prudent way to supplement the cost of airport operations and construction projects. Weber returned to Airports’ responsibility to regulators such as the Federal Aviation Administration. In a nutshell, Weber said the feds won’t allow City Hall to run a cheapskate commercial airport.

Caprioglio delivered the only kind words Weber would hear on this morning.

“In light of those facts and information,” Caprioglio said, “I will not be supporting the motion” to kill the $3 fee.

Council Member Esmeralda Soria was brief. She noted that she uses services such as Uber and Lyft.

“I don’t want to discourage people from taking Uber and Lyft as another form of transportation,” Soria said.

At this point, Council President Olivier said, the screen was clear. That’s is City Hall lingo for saying none of the other six council members had requested the floor, and now the council president would conclude the hearing with his remarks.

I don’t know if Weber at this point in his career had been around City Hall enough to know of Olivier’s strong free-market convictions. If not, Weber knows now.

Olivier asked what would happen to the airport if the $3 dies.

“First of all,” Weber said, “we wouldn’t have a revenue stream to offset the loss of parking revenues. That’s the main thing.”

Weber appeared to be headed toward a long explanation of government regulation of TNCs. Olivier interrupted him.

“Because people are not using the parking lot,” Olivier said, “we are going to tax people for getting a ride to the airport to pay for the fact that people are not parking in the parking lot.”

Weber: “No, we’re managing our assets so that we can, if we start losing revenues in one asset, we’ll try to recover (them). I forgot to mention that this is not a fee to the passenger or the driver. It’s a fee to the corporation.”

I thought to myself: Why did Weber have to say that? It was like a staggering heavyweight saying to Joe Louis – go ahead, here’s my exposed chin. Slug me.

Olivier: “Where do you believe that money originates from?”

Weber: “Um, that’s a business decision on Uber’s part.”

Olivier: “I’ll tell you where the money originates from – the poor slob in the Uber car getting a ride to the airport. The corporation doesn’t just invent money and write checks to taxing government entities. That money comes from the average person, the poor slob that’s trying to get to his mom’s funeral. The money has to come from somewhere, and that’s the problem that I have with the state of California. I know it’s not your fault. But it’s important to keep in mind when we bring these kinds of things forward that the state of California is home to the most taxed people in the union; the highest income tax; the highest gasoline tax, which is going to go up; cigarette taxes; everything is taxes. It comes from ordinary people. There’s not a rich, monopoly money bags man that says, ‘Aw, shoot, I have to write another check to the city of Fresno for a million bucks.’ That comes from ordinary people. So it’s an opportunity for this board and other boards in municipalities and small governments like ours around the state to try and fight these kinds of things. Because the money does come from somewhere.”

The give-and-take went on for a few more minutes. It was revealed that the $3 fee would generate about $9,000 a month ($3 multiplied by an estimated 3,000 monthly drop-offs/pick-ups), or $108,000 a year. Rudd jumped in at one point to say to the council, “We hear you loud and clear.” City Hall’s fruitless struggle to keep the local taxicab industry happy in the Age of Uber and Lyft was brought up for the umpteenth time.

It was merely noise. Olivier had already delivered the knockout blow. A referee would have called for the bell.

The vote was 5-1 to kill the $3 fee, with Caprioglio offering the only support. Council Member Steve Brandau was absent. It’s safe to predict that Brandau’s presence would have made it 6-1.

George Hostetter is The Sun’s Fresno Civic contributor – covering the City of Fresno, County of Fresno, and Fresno Council of Governments.

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