Seattle would charge a new 51-cent tax on each Uber and Lyft ride in the city, and use some of that money to finish the downtown streetcar, under a proposal released Wednesday by Mayor Jenny Durkan.
Expecting about $25 million a year from the tax over five years, Durkan proposes filling the $56 million budget shortfall for the streetcar, funding affordable housing and creating a new way for Uber and Lyft drivers to appeal sudden deactivations —sudden removal — from the apps.
Durkan’s office also plans to set a minimum pay rate for Lyft and Uber drivers, but will first study the issue before determining details. With City Council approval, both the tax and wage rules would start next July, Durkan said.
The plan — long under closed-door discussion in the mayor’s office — marks an attempt by Durkan to translate the ride-hailing vehicles often seen circling downtown into revenue, revive the beleaguered streetcar project and placate multiple interest groups, including labor advocates who say drivers are being mistreated.
“Make no mistake about it: This provides a valuable service for a lot of people … but it also places burdens on the city,” Durkan said Wednesday. “At the same time, no business should benefit by not treating its workers fairly.”
Uber and Lyft slammed the tax proposal, saying it will drive up costs for riders. “Drivers will also lose, as their earnings decrease with fewer overall rides,” said Lyft spokeswoman Lauren Alexander in a statement.
Durkan acknowledged the new tax could increase passenger fares but said she didn’t expect that to reduce ridership.
Reactions from driver groups were mixed, with some supporting the pay and deactivation measures and others calling the proposal a “regressive tax” wrongly aimed at projects not directly related to Uber and Lyft drivers.
Uber and Lyft gave about 24 million rides in Seattle last year, half of them starting or ending downtown, according to Durkan. The city expects that number to grow to 28 million this year and continue to rise.
Seattle already charges 24 cents a trip to cover licensing for transportation network company (TNC) drivers and to support taxi wheelchair accessibility. The new tax would effectively triple that to a total of 75 cents per ride.
The city may reduce the 24-cent fee but leave the total charge at 75 cents, directing a larger share to the new programs.
The total fee would be less than a $2.75 fee in New York City, similar to a 72-cent fee in Chicago and higher than the 20-cent fee in Massachusetts.
Over the next five years, the proposal would direct $56 million to the streetcar, $52 million toward affordable housing and $17.75 million for a new Driver Resolution Center.
The new streetcar, called the Center City Connector, would run along First Avenue and connect existing lines in First Hill and South Lake Union. Once set to open in 2018, the line is now expected in 2026. Mayor Jenny Durkan paused the project last year after cost concerns, but later decided to go ahead.
Delays, escalating construction costs and federal funding rules have driven up the project’s expected cost to about $208 million, not including associated utility work, according to the Seattle Department of Transportation (SDOT).
After 2025, the portion of the tax directed to the streetcar would be shifted to other transit, bike and pedestrian projects. Most of the housing money would also be shifted to those projects.
The housing money would have to be paired with other state and regional funding to build 500 units meant for people making between $15 and $25 an hour.
The Driver Resolution Center would offer representation for riders who have been deactivated in an arbitration process. The city has yet to decide which organization would run the center.
Drivers have complained that they can be essentially kicked off the apps with little warning. Drivers deserve “due process,” said Abdi Shire, who leads a collective of drivers called the Seattle Rideshare Drivers Association. “We are not a machine. We are human beings.”
The union that has organized some Uber and Lyft drivers, Teamsters Local 117, said little about the tax Wednesday but praised the driver pay and deactivation proposals.
“We view this as part of a broad-based package that will address the problem of unfair deactivation, establish driver pay standards with driver input, and at the same time make important community investments in affordable housing and transit,” said Lyft driver Peter Kuel in a statement provided by the Teamsters.
Michael Wolfe, executive director of the Uber-funded group Drive Forward, called the fee a “misguided regressive tax proposal that will only harm drivers and riders. It will make a transportation option Seattleites rely on every day less affordable.”
Durkan’s announcement essentially punts on questions about driver pay.
Drivers describe vastly different hourly pay, and some work full time while others use the apps to make extra cash. While Uber says Seattle drivers make a median of between $19 and $21 an hour before expenses, Uber driver Shire said that considering expenses and full-time work, “the driver community, they are low poverty level.”
Shire said drivers need a higher per-mile rate from the companies.
Because drivers are classified as independent contractors, they are not guaranteed Seattle’s minimum wage, which is now $16 for large employers, and must pay their own expenses like gas. They are also not paid for the time spent on the way to pick up a passenger or circling waiting for rides, which the city could seek to change.
Durkan said the city will soon begin a study of driver pay in Seattle and then release a detailed proposal for ensuring drivers make Seattle’s minimum wage.
For now, Durkan will send the tax proposal to the City Council as part of her 2020 budget, where its fate is unclear.
Most council members either declined to comment or did not respond to requests for comment. In a text message, streetcar opponent and Councilmember Lisa Herbold called spending money on the project “fiscally irresponsible.”
Councilmember Abel Pacheco said he was still reviewing the plan but that, as a person without a car, he is “willing to pay more to ensure the well-being of TNC drivers and address the impacts of Uber and Lyft.”
The mayor and council members could also face organized opposition from the companies.
Uber spokesman Nathan Hambley said the company would be “reaching out to more than 575,000 active drivers and riders [in King County] encouraging them to reach out to the mayor’s office and voice their concerns.”