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The Saga of RideAustin

How Austin’s city government dictated the rise and subsequent fall of RideAustin.

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Photo by Spencer Platt/Getty Images

RideAustin, the capital’s homegrown nonprofit, announced earlier this month that it’s lowering prices to compete with the two ridesharing giants. The departure of Uber and Lyft last year spurred RideAustin’s creation, but now the dynamic duo is back. The ridesharing services started operating on Memorial Day, the same day Governor Greg Abbott signed into law a bill overriding the city’s ordinance with a statewide regulatory framework. RideAustin has seen a steep drop in business since then, reporting “dramatic decreases in demand” in a recent Facebook post. The ridesharing service said it gave 62 percent fewer rides the first week of June than it did the week before Uber and Lyft returned.

Most Austinites are familiar with the backstory of the city’s ongoing ridesharing saga. In a political battle that made national headlines, Uber and Lyft spent $8.2 million—the most expensive campaign in Austin history—to persuade voters to back Proposition 1, an ordinance that would have repealed the city’s ridesharing rules, which included a fingerprint requirement for drivers, among other regulations. Austinites rejected Prop 1 in a referendum vote last May. Uber and Lyft, having warned that they would not operate under the city’s rules, promptly closed up shop.

In a post on Medium written one week after Uber and Lyft came back, RideAustin’s CEO Andy Tryba and COO Marisa Goldenberg speculated that “super-price sensitive folks” accounted for the sudden drop . Up until its announcement that it would cut rates, RideAustin was charging a few more cents per minute than the cheaper apps, including Uber and Lyft. Now, its 99 cents a mile and 20 cents a minute rate is the lowest in Austin by a narrow margin (Uber and Lyft both charge $1 a mile and 20 cents a minute). But it’s not clear that lower rates attract more customers in the ridesharing market. One academic study of Uber’s surge pricing found users would be willing to pay significantly more for rides, a phenomena that’s also been observed locally, suggesting that tech reliability and consistency are more important to most riders than prices.

Behind much of the turmoil in Austin’s ridesharing market has been a decidedly non-market force: city government. After all, it was the city council’s insistence that no compromise with Uber and Lyft was possible on the fingerprinting issue that prompted the companies to push for a referendum vote in the first place. To his credit, Mayor Adler tried to broker an agreement between city Council and the ridesharing giants that would have made fingerprinting voluntary but also encouraged drivers to do it anyway. But city Council balked, defeating the compromise measure in an 8-2 vote last February. That failure triggered the Prop 1 vote, which was, perhaps, not instructive about what most ridesharing users want. A mere 48,673 Austinites voted against it—enough to defeat the measure but not nearly enough to gauge the market. Although Uber and Lyft’s Prop 1 campaign may have been misguided and heavy-handed, the narrative pushed by the city—that Austin residents deeply cared about fingerprint background checks—has been undermined by the number of riders who seem to have returned to still fingerprint-less Uber and Lyft in recent weeks.

Throughout this ordeal, the city’s political players became entwined in the ridesharing market—not just as regulators, but also as players. The same day Uber and Lyft went dark last May, Mayor Steve Adler’s office outlined seven things the city was doing to address transportation in their absence. The list included things like, “working to help TNCs [ridesharing companies] that operate in Austin to be successful,” and “exploring a local nonprofit TNC with Austin entrepreneurs,” a reference to what would become RideAustin.

The most ambitious idea was the mayor’s so-called Thumbs Up program, a kind of municipal tech startup to create what Adler called a “third-party, cross-platform badge validator,” based on various safety measures like fingerprinting and background checks. The idea was to allow any peer-to-peer vendor, from Uber to Airbnb, to display the badge on its app to show that a driver or homeowner had passed a given safety test. Adler told the American-Statesman it was, “potentially a real value addition to that sharing economy.” It was this sort of program the mayor had in mind when he told City Lab last May that Austin was “innovating too quickly for Uber and Lyft.”

Nothing really came of the idea, though city council passed a Thumbs Up ordinance last January and assigned a task force of city hall staffers and volunteers to work on it. Today, there’s a dormant web page with sparse promotional materials and some documents explaining how Thumbs Up is “best understood as a voluntary, non-regulatory layer that can sit on top of any ordinance that is passed.” If Thumbs Up was a kind of public startup, Mayor Adler was its hapless founder.

The Thumbs Up program’s failure to launch underscored how the entire ridesharing free-for-all was a solution in search of a problem. The city claimed fingerprinting was necessary for safety; it was the only way to ensure that drivers could be trusted. But given Austinites’ willingness to embrace Uber and Lyft once more, it doesn’t seem as if they are fearful of ridesharing sans fingerprinting. The question is, then, what problem did Austin political leaders think they were solving by forcing ridesharing firms to fingerprint their drivers?

Although the city might not have solved a problem, it did create one. When Uber and Lyft departed, some 10,000 drivers were suddenly out of work. The city was soon inundated with requests for fingerprint background checks from drivers registering with a dozen or so local ridesharing companies that sprang up to meet demand. At the request of the new firms, which were struggling to comply with the city’s new regulations, the transportation department hosted a job fare for drivers that offered discounted fingerprinting.

RideAustin was by far the most ambitious of these dozens of new ridesharing apps. The company was launched two weeks after the Prop 1 election by local tech leaders Joe Liemandt, founder of the software company Trilogy, and Tryba, CEO of a tech job placement company called Crossover. Throughout the run-up to the Prop 1 vote, the pair had been consulting with the city about how to keep Uber and Lyft in town. Tryba says they were trying to get the city to understand why the two big ridesharing apps were so opposed to fingerprinting. “We were advocating for Uber and Lyft, pushing really hard to keep them here,” he says. “The entire tech community recognized that, as a city, we need ridesharing, and we fought hard to keep them here.”

When they left, Tryba and Liemandt decided to create RideAustin. As a nonprofit venture, it was focused on transportation not as a commodity but as a public service. From the outset, Tryba and Liemandt make it clear they had no ambition to expand to other cities or increase their profit margin like their for-profit competitors. In a sense, RideAustin was designed to be the anti-Uber and Lyft, branding itself on social media under the hashtag, #ridelocal, and touting its more equitable pricing scheme. Unlike Uber and Lyft, which take about 20 percent of each fare, RideAustin drivers keep more of their fare, and surge pricing is optional for riders. For the past year, the company had been averaging about 60,000 rides a week and had captured about 50 percent of the market—until Uber and Lyft came back to town.

But there’s the rub. RideAustin’s business model is now cratering because it was predicated on city hall. Not only did city government create the conditions for RideAustin to form and thrive in the first place, but the nonprofit has been awkwardly close to the city from the beginning. In addition to RideAustin’s founders advising city officials ahead of the Prop 1 referendum, the nonprofit’s director of community engagement was Joe Deshotel, the former communications director of the Travis County Democratic Party.  It seemed that Mayor Adler and city council had something like RideAustin in mind after the defeat of Prop 1, and its success over the past year has opened up new vistas of collaboration with the city, like Cap Metro reportedly working with RideAustin on a paratransit solution for the city’s disabled community.

There’s also the unusual circumstance of RideAustin operating as a nonprofit. Although the firm claims its 501(c)(3) status has been approved by the IRS, RideAustin isn’t a typical nonprofit because it competes with for-profit firms. That could endanger its tax-exempt status because of something called the “commerciality doctrine,” which the courts use to determine whether a nonprofit organization is operating exclusively for tax-exempt purposes. Besides competing against commercial firms, another factor is whether a nonprofit uses paid professional staff, a description that certainly fits the ridesharing firm but also fits Crossover, a company owned by Tryba that’s done some heavy tech lifting for RideAustin. The firm has yet to post its 990 form, which all nonprofits are required to file with their taxes, so it’s still unclear how the company has spent the reported $7 million ginned up in an initial round of fundraising.

As part of its application the IRS for nonprofit status, RideAustin touted its donation program, an in-app feature that allows riders to round up their fare to the nearest dollar and designate it for a local charity. But of course, facilitating donations isn’t unique to nonprofits. H.E.B. and a host of other for-profit businesses have similar programs (Lyft recently introduced a round up donation feature awfully similar to RideAustin’s). So far, the donation program has collected about $250,000 for local charities, according to RideAustin’s website, but that too hasn’t been free of controversy. In May, Deshotel resigned in protest, citing a policy that requires charities to promote RideAustin and file reports on their promotion efforts in order to receive donated funds. In one email sent out to local charities, RideAustin urged them to participate in its “Driver Adopt-A-Charity” program: “You will need to provide a 1-pager of talking points that you’d like the driver to discuss and allocate $500 of your Round-Up for t-shirts with your logo on them.” In a statement, Deshotel said he made the decision to leave RideAustin “rather than seek resources from our community partners.”

Several charities I spoke with that have received donations from RideAustin deny that they are required to do anything to participate in the program, but Tryba explained to me that there are some basic requirements that charities must at least inform their constituencies that they are in the app so they can receive donations. Since the program launched, hundreds of Austin charities have asked to be included, but the app can only support about 60 charities. “So we ask the charities to promote it and tell us how they’re promoting it,” says Tryba, adding that RideAustin doesn’t take any money from the organizations.

Whatever the details about the donation program or RideAustin’s nonprofit status, the most damning charge against the organization is one for which its founders are not responsible. After all, Tryba and Liemandt tried to keep Uber and Lyft in Austin. Now that the ridesharing giants are back and attracting the lion’s share of riders, what is the purpose of RideAustin? Does the city really need a nonprofit ridesharing service?

Tryba says it does, if only to help push the industry in a different direction. He’d like to see Uber and Lyft pay their drivers more, for one thing. But he’d also like them to be more open with their data. In Tryba’s view, ridesharing companies are going to have to share data and collaborate, much like the software industry learned to do with open source software, if they want to realize risesharing’s enormous potential. “If you want to get to autonomous vehicles and all the other things that we want to do with transportation, we’re going to need to collaborate,” he says.

For now, data-sharing and collaboration don’t appear to be on Uber and Lyft’s agenda, at least not in Austin. As they reclaim market share, it’s no wonder RideAustin can’t compete: it was designed not to. The city’s political establishment never wanted RideAustin or any of the local firms to have to compete in a truly open market—especially one that, despite their best efforts, they couldn’t control.

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  • St. Anger

    to suggest that the city overstepped its mandate by not sufficiently accounting for market forces is to fail to understand the purpose of government.

    you also make quick work of the referendum and its context, where austin voters rejected uber in the face of its ten million dollar campaign to bully the local population.

    it is little surprise to see TM once again acting as a chamber of commerce fanzine, but to absolve the state lege of its role here in favoring capitalism over popular sovereignty is, well, ignorant. sad.

    • Sherlock333

      OK, so “Saint Anger” doesn’t understand what “popular sovereignty” is, and is confused by the historical relationship between free markets and free people. That’s because of “Saint Anger’s” miseducated and half educated ignorance… which makes me sad for Saint Anger.

      • St. Anger

        Good one.

        But lacking an argument, I give it a C plus.

        Of course, it has been 2 years since I taught university political science, so it could be you have newer info …

  • Michael Olson

    “The city claimed fingerprinting was necessary for safety; it was the only way to ensure that drivers could be trusted. But with the exception of New York City, no other municipality in America requires fingerprint background checks for ridesharing drivers… The question is, then, what problem did Austin political leaders think they were solving by forcing ridesharing firms to fingerprint their drivers?”

    This premise is patently false. At the time Austin passed its fingerprint requirement, Houston already required fingerprint background checks, beginning a year earlier in late 2014. Uber went along with it (albeit with further battles with Houston) while Lyft decided to leave the market. Houston was a contentious issue during Austin’s Council hearings. Council members often asked Uber why they were willing to accept fingerprint checks in Houston but not in Austin, a question which Uber representatives evaded. By contrast, Houston representatives testified that the fingerprint check successfully detected felony records that TNCs did not, a claim Uber has often countered. In all likelihood, Uber’s aggressive tactics in 2015 created a deep sense of mistrust, and Austin’s council members erred on the side of caution by siding with the more restrictive regulations that Uber had already accepted in Houston.

    To be fair, Uber complained in a 2016 blog post that the fingerprint process was hurting their ability to recruit drivers. Still, the insinuation that Austin alone came up with the idea to implement fingerprint checks is false and heavily misleading.

    • Gritsforbreakfast

      The insinuation that the city council was acting on any motive except to protect the taxicab companies/drivers from competition is “false and heavily misleading,” to use the phrase of the moment. Cabbies had captured their regulators through the political process and the rules were being used to keep out competitors, not as some safety mechanism. Now that Uber and Lyft are back, there won’t be some rash of safety problems. That was just a public relations ploy to cover up the council’s true, anti-competitive motives.

      • jimbonics

        Ding ding!

      • St. Anger

        You hope.

    • Jeff Kirk

      “This premise is patently false. At the time Austin passed its fingerprint requirement, Houston already required fingerprint background checks, beginning a year earlier in late 2014.”

      I wouldn’t say it’s “patently” false, given that Houston was the ONLY domestic market where Uber and/or Lyft operate — out of nearly 300 — that had a fingerprint mandate (NYC excepted, as already noted). Further, the only reason Houston had one was because Uber and Lyft woefully underestimated the amount of level the city’s taxi cartel and its lobbyists have at City Hall. (This was the first, and probably last, time an opposing party had *more* lobbyists in place than Uber and Lyft combined.)

      Put another way, it takes a gargantuan amount of gall to assume you’re correct about something and nearly EVERYONE else is wrong, but that’s exactly what the city council did on the fingerprinting issue — and btw fingerprint-based background checks are demonstrably *less* effective than electronic ones, for myriad reasons city officials didn’t bother to investigate.

      “Council members often asked Uber why they were willing to accept fingerprint checks in Houston but not in Austin, a question which Uber representatives evaded.”

      I can answer it: they did so purely to snub Lyft (which they’d obviously rather not admit in a public forum). At the time the Houston ordinance was being negotiated, the two were in a particularly heated race to enter new markets, so despite its misgivings, Uber stayed put in Houston even after its fingerprint mandate went into force. That said, they quickly realized how grave an error in judgment they’d made, and subsequently joined Lyft in exiting the San Antonio market a few months later after it, too, passed a fingerprint mandate. (It was reversed six months later after backlash over it resulted in San Antonio electing its first Republican mayor ever.)

      “By contrast, Houston representatives testified that the fingerprint check successfully detected felony records that TNCs did not, a claim Uber has often countered.”

      At the time, Uber and Lyft were restricted by California law against performing background checks beyond seven years in scope. The California legislature passed this law for entirely progressive reasons: an ex-con who’s lasted five years post-prison without committing another crime is statistically *less* likely to commit an additional crime than any random person with a clean record. Many employers, however, refuse to hire ex-cons under *any* circumstances, regardless of whether they’ve both paid their debt to society behind bars *and* been successfully rehabilitated, so absent such laws, ex-cons have to wear a de facto scarlet letter the rest of their lives — which is one of the *only* reasons long-freed ex-cons return to a life of crime even after the five-year mark.

      That said, both companies realized that the public perception of them “overlooking” ex-cons in hiring drivers– despite it being patently misleading — was proving detrimental in instances such as Austin’s TNC fingerprint mandate, so last fall they successfully convinced the California legislature to restructure the existing law to allow for lifetime-long background checks for violent felonies and any & all sex crimes. (And that btw is why sensationalist news stories of Uber/Lyft “overlooking” ex-cons who go on to attack passengers have largely disappeared.)

      Oh, and btw you realize that Houston had the same problem as Austin, right? That its fingerprint checks initially only uncovered crimes committed WITHIN THE STATE?

      “Still, the insinuation that Austin alone came up with the idea to implement fingerprint checks is false and heavily misleading.”

      This is true: the idea came directly from Ed Kargbo, the CEO of Yellow Cab, not the city itself. Kargbo began lobbying Ann Kitchen’s office in spring 2015, almost immediately after she assumed office, and is on record having met with her chief policy aide, Ken Craig, between March and July 2015, when the revised TNC ordinance (including its fingerprint mandate) was in the works.

      Further, Kargbo and the entire local taxi lobby had been pushing for fingerprinting ride-hail drivers ever since they first entered the market in April 2014. To state the obvious, their claim that they were doing so “due to safety concerns for all Austinites” was an unusually piquant pile of horse manure; they already knew by then that fingerprinting was a “dealbreaker” for Uber and Lyft, and that they’d likely exit a city that opted to do so (as had already happened in a few locales, before U/L marshaled their considerable social media prowess to convince local councils and aldermen not to engage in de facto taxi-industry protectionism).

  • hadees

    More of the money does go to the drivers, so it is a better platform. But you know what? Ridesharing isn’t Facebook, I don’t care what my friends use for rides, i’ll use the one that pays the drivers better and right now that’s Ride Austin.

  • Jeff Kirk

    While I appreciate the link to my own Medium piece on the subject — but less so the amount of its content TM’s reporter appears to have “borrowed” without attribution — I’m completely flummoxed how the author reached the following conclusion:

    “As they reclaim market share, it’s no wonder RideAustin can’t compete: it was designed not to. The city’s political establishment never wanted RideAustin or any of the local firms to have to compete in a truly open market—especially one that, despite their best efforts, they couldn’t control.”

    While I personally believed it was all but certain Uber and Lyft would eventually return to Austin, despite last year’s Prop 1 referendum, I was in a decidedly tiny minority on the subject. Why else would a dozen startups immediately jump into the local ride-hail fray, California gold-rush style? RideAustin excepted, all of them were for-profit companies that were obviously *expecting* to profit at some juncture, though I think it’s reasonable at this juncture to point out the “fools rushing in” aspect of it all. (There was never any realistic chance the Austin market could support even *six* ride-hail companies, let alone double that number.) And while RideAustin’s execs now maintain that they “knew all along” Uber and Lyft would return, their earlier statements — made well before it was clear the state legislature would likely preempt Austin’s TNC ordinance — strongly infer otherwise.

    In any event, the author’s conclusion gives *way* too much credit to the city’s political establishment, which was (and still is) operating with nary a clue. Not *one* Austin City Council member believed Uber or Lyft would leave town after the Prop 1 vote, up until the moment they did exactly that. They fully expected the two to roll over and accept the fingerprint mandate, as amply demonstrated in both their comments on the subject as well as them literally having no backup plan whatsoever in case Prop 1 failed. After the two left town in quasi-exile, City Hall was basically in triage mode for the next several weeks (okay, more like months) getting “provisional” licensure set up for all the newly jobless ride-hail drivers.

    Further, once everything had cooled down a few months later, the council thought it had “triumphed” over those big, bad Silicon Valley companies, and consistently maintained that they had taken the “moral high ground” and succeeded. (“What’s that, you say? Houston is the *only* American city out of the 282 served by Uber or Lyft without a fingerprint mandate? Well, clearly Houston must be right and all those other 282 cities are wrong! We’ll just pretend Houston isn’t wrong about everything else in the world!”) As such, its already intractable resistance to compromise only worsened. When Uber’s new GM for the Texas market returned to City Hall last winter to at least *try* to restart talks with Ann Kitchen, the council member largely responsible for the whole mess, she refused to even *meet* with the man!! Instead, she dispatched an aide (!!) to “note his concerns.” No: it wasn’t until HB 100 made its way out of committee that anyone at City Hall realized just how badly they’d screwed the pooch. (Luckily for them, the council’s and mayor’s enablers are predisposed to hate anything and everything that emerges from the Capitol — even in the rare case of the lege being right about something, as it was in this particular situation.)

    It’s not so much that the city never “wanted” RideAustin et al to be able to compete in a truly open market; rather, City Hall never *expected* they’d ever *need* to compete.