Airports around the country have increased or implemented fees for rideshare usage, and, while TNCs like Uber and Lyft would prefer not to see them at all, they’re typically met with little fanfare. Not so for the City of Phoenix’s Sky Harbor Airport. Below, Blair Schlecter, Vice President of Economic Development and Government Affairs for the Beverly Hills Chamber of Commerce, outlines a contentious debate between Sky Harbor and Uber/Lyft that has escalated to the Arizona Supreme Court.
The growth of Transportation Network Company services (TNCs) such as Uber and Lyft has become a hot topic in recent years. As we recently wrote about in a white paper titled “Congestion at the Curb: An Analysis of Ride-hailing at LAX and Recommendations to Optimize the TNC System at Airports”, airports around the country have been grappling with the policy issues surrounding TNCs, including how to handle the congestion, how to address the passenger experience, and how to appropriately charge for use of airport facilities. Cities and airports have already taken a number of steps to address these challenges, including charging drop-off and pick-up fees to the TNCs and relocating such services away from curbside pickup in some cases.
Enter Phoenix, Arizona, where a dispute between Uber, Lyft and Phoenix’s Sky Harbor Airport about an increase in fees to drop off and pick up passengers has become a flashpoint in the evolution of the ridesharing space. This issue has now given rise to an interesting policy and legal conflict between the State of Arizona and the City of Phoenix over Phoenix’s authority to impose such a fee.
Quick links:
- Read the full report here: Congestion at the Curb: An Analysis of Ride-hailing at LAX and Recommendations to Optimize the TNC System at Airports
- Related: Lime Threatens to Sue Up-and-Coming Scooter App
Sky Harbor Airport’s Rideshare Fees
Phoenix’s Sky Harbor Airport (Sky Harbor) is located about 3 miles east of downtown Phoenix and is Arizona’s largest and busiest airport. Currently, Uber and Lyft pay a $2.66 fee for pickups at Sky Harbor.
In December 2019, following several months of discussion, the City of Phoenix enacted an ordinance adding a drop off fee of $4 per ride and increasing the pickup fee to $4, effective February 1, 2020 (with the fee increasing to $5 by 2024). The new law provides for a lower $2.80 drop-off and pick-up fee at the PHX Sky Train Station.
Interestingly, the new law provides significantly lower fees for taxis, shuttles and charter buses (although each of these services has new drop off fees to pay). The new fees reflect recent changes at airports around the country which often charge both drop off and pick up fees.
According to a press release by Sky Harbor, the reason for the change is straightforward:
“Commercial ground transportation businesses have been paying only a fraction of what it costs to operate the ground transportation program at Sky Harbor that supports their operation and are currently being subsidized by other Airport businesses.”
Indeed, according to Sky Harbor, rideshare, which represented only 9.3% of the commercial business in 2016, now accounts for 70% of commercial traffic. additionally, the City of Phoenix Aviation Department provided the following rideshare fees sheet, comparing Sky Harbor to various other airports around the US:
Almost immediately after the law was passed, both Uber and Lyft threatened to cease operations at the airport, stating that the new fee threatened the viability of their business at the airport and represented an unfair penalty on their drivers and customers.
A Sub-plot Thickens
An interesting twist has recently developed: the Arizona Attorney General’s office is now arguing the new fees violate the Arizona Constitution. The AG’s office has filed a lawsuit to stop the law from taking effect.
In November 2018, Arizona voters passed Proposition 126 which added to the Arizona Constitution a rule that “any … city … shall not impose or increase any … transaction-based … fee … on the privilege to engage in … any service performed in this state.” The State of Arizona is therefore claiming that the City lacks the authority to increase fees on ridesharing services at the airport.
It will be interesting to see how this issue plays out in the courts. In the meantime, the City of Phoenix has decided to hold off on enforcing the new law until the Arizona Supreme Court decides whether the fee increase violates state law.
Analysis
There are a number of interesting issues here. For one, why are Uber and Lyft only threatening to boycott services in Phoenix? Los Angeles International Airport (LAX) charges ridesharing services $4 for drop off and $4 for pickup. Similar fees exist at other airports. Why are the ridesharing services not threatening to boycott LAX and other airports with similar fees?
A boycott may ultimately hurt the ridesharing services more than the airport. After all, no one disputes the ability of an airport to charge a usage fee to TNCs.
It is unclear what about this proposed fee increase is problematic. Is it the percentage increase? Is it the addition of a fee on drop offs? Or is it the fact that this fee is in Phoenix, Arizona, a state with a lower cost of living than say, California? It would be helpful to understand what fees would be acceptable to the TNCs.
On the other side, Phoenix certainly has an interest in using fees to offset costs. But the fees are going from $2.66 to $8 in many cases. Why the steep increase in fees all of a sudden? Sky Harbor Airport could do more to explain the basis for this change.
In the meantime, the new law is being challenged by the State of Arizona, which sets up a dispute between levels of government over who regulates ridesharing. Of course, this issue is specific to the provision in Arizona’s Constitution limiting taxes and fees and so is unlikely to be an issue in other states.
Conclusion
The fight in Phoenix over ride-hailing congestion and fees is just one part of a larger push and pull between emerging mobility companies and how they use public goods. The outcome in Phoenix will be interesting to watch, as it may be a harbinger of future interactions between the private and public sector over the use and regulation of ride-hailing.
Readers, why do you think Uber and Lyft are being particularly tough on Phoenix but not on Los Angeles? Do you think this increase in fares by Phoenix’s Sky Harbor Airport is fair or unfair? Who do you think will be punished more if fares increase – the airport or the rideshare companies?
-Blair @ RSG
Blair Schlecter is Vice President of Economic Development and Government Affairs for the Beverly Hills Chamber of Commerce. He has spoken and written about transportation policy and innovation issues,including the impact of new technology on our society, inforums including CoMotion LA, ITSCalifornia, Eno Transportation Weekly and ThinkingHighways Magazine, and serves as a consultant and advisor to companies in the mobility space. The opinions expressed above are those of the author and do not necessarily reflect those of the Beverly Hills Chamber of Commerce.
