Pink mustaches, custom T-shirts, petitions and placards flooded Minneapolis City Hall Tuesday as opposing transportation companies clashed at a public hearing over how to regulate newcomer transportation companies that let people become chauffeurs of their own personal cars.

The debate highlights the intense competition between the growing number of traditional cabs and Lyft and Uber, the two smartphone-based companies now operating illegally while the city hashes out how to regulate them.

The main issue is whether Lyft and Uber are distinct enough from taxicabs to warrant the more relaxed regulations that are under review. Taxi industry representatives, highlighting the growing use of smartphone apps to find cabs, argue their services are similar enough that one ordinance should cover everyone.

Lyft and Uber supporters contend that the services are unique by allowing drivers to work part time, make connections in their community and deliver superior service because of driver and customer ratings.

“I have now built relationships with many of the drivers in the Lyft community,” said Lyft customer Jesson Hunt. “I know them, they know me. I know their back story, they know mine.”

The debate mirrors one happening in cities across the country, where Lyft and Uber have run up against regulators more used to dealing with traditional cabs.

Matthew Johnson, right, waited to speak at a public hearing on Tuesday as supporters of app-based transportation companies also spoke at City Hall.

The proposed rules would legalize Lyft and Uber in Minneapolis as so-called transportation network companies. If the proposal is approved, the city would regulate their insurance and require their cars to be inspected, things the city already does for taxi cabs. By definition, however, only taxicabs could accept passengers that hail vehicles on the street. Rides with Uber and Lyft would have to be prearranged.

The City Council committee weighing the new regulations took public testimony Tuesday but is expected to continue working on the ordinance for several weeks before a final vote.

The taxi industry contended that the proposed ordinance sets up a two-tier regulation that heavily benefits Lyft and Uber, which connect drivers with passengers via smartphone apps. Taxi companies are wading into apps themselves, but also accept phone calls and street hails.

A side-by-side comparison of the regulations drawn up by the taxi industry’s lobbyists notes that taxi drivers can only charge the city-specified meter rate, while Lyft and Uber could charge more under so-called surge pricing, which might be imposed during times of high demand. The lobbyists also say that taxi drivers must submit to a city background check, while the newcomers could use private. In addition, taxis must swap out cars every five years vs. 10 for Lyft and Uber.

“They’re cabdrivers,” Zach Williams, owner of Rainbow Taxi, told the committee. “We need one ordinance for all of this transportation because we’re the exact same business.”

They are seeking a solution similar to what occurred in Dallas, where stakeholders jointly hashed out new rules that essentially applied one standard to all “for-hire” vehicles.

But in Minneapolis, the ordinance sponsor, Council Member Jacob Frey, said after the hearing that he doesn’t yet know if that’s an option but he is open to considering relaxed taxi regulations.

Cabs have higher costs

The threats posed by new, unregulated competitors like Lyft and Uber come at a tumultuous time for the Twin Cities taxi industry. The number cabs roaming the streets of Minneapolis has skyrocketed since a cap on the total number of licenses was lifted in 2006, rising from 373 in 2007 to 854 vehicles today.

And the cost of doing business as a cab isn’t cheap. Drivers who own their taxis must pay $475 a year to maintain a license, $135 twice a year to have vehicles inspected, upward of $155 a week to their dispatch company and about $580 a month to maintain commercial insurance, said Waleed Sonbol, owner of Blue and White Taxi. That’s not including gas and the cost to replace the car every five years — eight if it is handicap accessible or fuel efficient.

Companies like Blue and White Taxi are seeing fewer fares from street hails than they once did, and Sonbol said the flood of cabs has made drivers increasingly desperate for larger fares. Accounts with insurance companies and businesses help offset street hail revenues. “These accounts [are] really what helps keep them going,” Sonbol said in an interview.

Under the proposed ordinance, Lyft and Uber drivers would be “endorsed” by their own company rather than individually licensed through the city. The company must ensure the vehicle is inspected at a city-approved facility, conduct background checks in accordance with state statute and carry $1 million in commercial liability insurance that’s in effect when vehicles are active in the system.

Rethinking transportation

Testifiers raised questions Tuesday about precisely how “active” drivers would be determined for insurance purposes, however. That same question arose earlier this year in San Francisco, when an Uber driver struck and killed a young girl between fares.

Supporters of the services note that extra options help people rethink transportation. Jim Black, Lyft’s California-based executive vice president, told the committee that the ordinance was an opportunity to “modernize” the city’s transportation model. His company’s cars are know for the pink mustaches on the front.

“As the people of Minneapolis discover how easy and efficient it can be to get a ride from a variety of sources, they will move away from driving their own cars,” Black said.

Bambi Barclay, a driver for Blue &White taxi, and other drivers attended apublic hearing at Minneapolis City Hall Tuesday focusing on how to regulate app-based transportation companies in the city.

Technology hasn’t passed over the taxi industry, however. Based in a posh Northeast office complex with an Internet start-up vibe, Blue and White Taxi is linked to two smartphone apps, including the Lyft-like app Taxi Magic, and are in the testing phase of a third. Like Lyft, Taxi Magic pinpoints a user’s location and allows them to watch a car en route to pick them up.

“I like automated systems, because I feel it allows my staff to do more stuff,” Sonbol said of the app-based dispatch, which is automated. “It allows them to spend more time on the customer service side.”

Blue and White’s cars, which are almost entirely driver-owned, are also outfitted with back-seat consoles that allow for easy credit card swiping. Cabs have been required to take credit cards since 2012.