Minneapolis embraced a new wave of tech-driven transportation companies Tuesday by giving initial approval to legalizing Lyft and UberX services, while simultaneously loosening regulations on the city’s taxi industry.

The unanimous City Council committee vote follows months of haggling between the smartphone-based companies, the taxi industry and city regulators. The full council must still weigh in on the proposal next week.

Lyft and UberX essentially allow people to act as chauffeurs of their own vehicles, and customers contract with them through their GPS-enabled smartphones. Their arrival several months ago ignited a debate at City Hall over how to regulate these unlicensed businesses, which often compete with heavily regulated taxicabs.

Despite a push for one ordinance to cover both industries, the final language sets out clear differences. Only taxis can pick up passengers who hail them on the street, for example, but services such as Lyft aren’t bound to charge rates set by the city.

“I’m here to thank you for … welcoming Lyft into the Minneapolis market,” Candace Taylor, manager of government relations at Lyft, told the committee. “We intend to expand our service … [and] are committed to making sure there is accessibility for everyone in this jurisdiction.”

Critics said that Uber, the owner of UberX, and Lyft, now known as “transportation network companies,” will raise prices without government oversight and discriminate against certain passengers.

“People who don’t live in very nice neighborhoods, they don’t have to pick up or drive home,” testified Martha Hague at Tuesday’s hearing.

The proposal’s sponsor, Council Member Jacob Frey, countered that the city will audit where the companies have been accepting and denying rides. Plus, he noted, taxis are already discriminating, referencing a recent Star Tribune article documenting an incident in which cabdrivers refused rides to two black women. “Will there be problems with Lyft and Uber? There may very well be. We live in a society that is at times discriminatory. Now as government, it’s our job to guard against that,” Frey said.

While transportation network companies can sometimes be cheaper than cabs, the UberX service charges three times its normal rate during peak hours — with a $20 minimum. On Tuesday afternoon, Lyft was charging $1.71 per mile and $0.22 a minute, plus nearly $1.68 in fees. Taxis can charge $2.75 a mile under the meter rate, after a first mile of $4.70 and a $2.50 initial fee.

“As a cabdriver, I cannot raise my rates,” said driver Fred Anderson. “And I’m obligated to take all customers unlike [transportation network companies].This is not a level playing field.”

But the taxi industry scored major victories with an effort led by Council Member Abdi Warsame to change some ordinances in place since the 1980s.

Vehicles can be inspected at non-city facilities, for example, and cabs can be in use five years longer than they can now. A requirement to have a certain number of wheelchair-accessible cabs was replaced with an incentive program for both taxis and the transportation network companies.

Drivers would also be able to use cabs as private vehicles, with more parking privileges, and owners could charge drivers more than $85 a shift.

The city will impose a license fee of $35,000 a year on transportation network companies, and another $10,000 as a surcharge if they do not have wheelchair-accessible vehicles. The license fee will help pay for a new inspector, while the wheelchair charge will help fund a to-be-determined fleet of accessible vehicles.

Insurance proved to be one of the trickiest parts of regulating transportation network companies. UberX, for example, uses a hybrid commercial policy that “supplements a driver’s personal auto insurance.” The state’s insurance commissioner said that this raised the possibility of “unacceptable” insurance gaps, recommending that UberX obtain traditional commercial insurance.

The current proposal requires drivers to have their personal insurance policies acknowledge their roles as occasional commercial drivers. Transportation network companies then must cover drivers when they are logged into the system.

“This is an innovative business model,” Frey said of the taxi alternatives. “This is thinking outside of the box. This is what progress looks like. And any time you have progress, there will be pushback.”

Warsame said the proposal is intended to take some burden off taxicabs, which despite heavy regulation in Minneapolis, have grown in numbers from 373 in 2007 to 854 today because the city lifted a cap on the number of licenses.

“I believe that taxicab drivers are ambassadors to the city of Minneapolis,” War­same said. “But they have not been treated that way in a long time. I also believe that they are an integral part of our public transportation network.”

Twitter: @StribRoper