“Tax” on Uber and Lyft Would Actually Be a $4 Million Windfall to the PPA

And guarantee nothing for Philadelphia schools. At least that's how the bill is written right now.

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First it looked like it was for the kids, and now it looks like it’s for the Parking Authority.

A bill in the state Senate that would allow alternative taxi services like Uber and Lyft to operate legally was initially written so that the tax revenue the services generated in Philly would be split between the Philadelphia Parking Authority and the Philadelphia School District, with two thirds of the money going to education. But the bill, which was approved by the state House Committee on Consumer Affairs earlier this month, has undergone an obscure but meaningful change. In the current version, PPA is guaranteed $4 million in revenue from Uber and Lyft before the schools can collect a dime.

The first version of the bill levied a 1 percent tax on the total revenue from all fares in Philadelphia. Two thirds of that was to be given to the School District, with one third given to the Philadelphia Parking Authority, which would be charged with regulating the services in the city. But the latest version of the bill approved by the House committee lays out a different scheme.

The new version levies a 1.7 percent tax on the services, but requires a “minimum annual assessment fee” of $2 million from each Tier 1 Transportation Network Company (those are the biggest ride-sharing services with more than 10,000 drivers, like Uber and Lyft). That $2 million goes straight to the PPA. After that minimum payment, the schools would collect the balance of the assessment up to $2 million. If the total tax revenue goes above $4 million, the PPA and the schools would split the assessment 50-50.

It’s a complicated scheme. I tried to draw a picture of it in my notebook and failed, and not just because I’m bad at art. Let’s plug in some hypothetical numbers, assuming that Uber collects $100 million. (That’s too high; Uber projects reaching $50 million a year in revenue in Philadelphia, according to Billy Penn. But let’s give them $100 million a year for the sake of argument.) Using that assumption, if the original bill were enacted, that 1 percent would equal $1 million: The schools would get $666,667 and the PPA would get $333,333. If the current version of the bill is enacted, PPA would get $2 million, and then the remaining rev—Oh look! There’s no remaining revenue.

A 1.7 percent assessment on $100 million is only $1.7 million. PPA would still get its $2 million, and the schools would get nothing. The current version of the bill basically requires the largest ride-sharing services like Uber and Lyft each to pay a $2 million fee to the PPA rather than a tax that benefits the schools.

In order to drive even one dollar to the schools, under the current legislation, Uber and Lyft would have to earn more than $117 million apiece from fares in Philadelphia. For the schools to get as much as the PPA, each service would have to earn more than $234 million a year.

Brian Abernathy, deputy managing director for the city, said he acted as a mediator between the Parking Authority and the ride-sharing companies in negotiations over the terms of the state legislation.

“My job was to reach a compromise between the Parking Authority, which had been solid in its opposition, and Lyft and Uber, which had been unreasonable in its expectations, and I think we came a long way in getting that movement,” Abernathy said on Saturday.

The bill isn’t perfect, Abernathy said, and he expects it to change again. (He said Lyft doesn’t qualify as a Tier 1 company, but it meets the definition as defined in the bill.) He also noted that the companies and drivers are responsible for paying other business and wage taxes in Philadelphia.

“The city’s goal in all of this is to have transportation network companies legal so they can operate at the airport and 30th St. Station,” Abernathy said.

As PlanPhilly reported in March, the Parking Authority’s payments to the School District are already dropping. Councilwoman Helen Gym said she has asked PPA for an audit that she has yet to receive. The new provisions in the state authorizing legislation appear to provide resources to schools while in fact just securing a payment for the Authority, she said.

“It’s time for the PPA to figure out how to manage its resources and uphold its responsibility to support our public schools,” Gym said on Friday.

PPA spokesman Marty O’Rourke directed questions to State Representative Robert Godshall, the Montgomery County Republican who chairs the House Committee on Consumer Affairs. Godshall said on Friday that the Philadelphia portion of the bill was worked out between the Parking Authority, the ride-sharing companies and local representatives.

“Given the hell that our children are going through to get an education, they should clearly be first priority on any potential new revenue options,” said state Senator Vincent Hughes. “While I support PPA overseeing ride share, this proposed financial arrangement, which puts the kids last, is not a good one. They should always be put first. I think there is an opportunity for a fair resolution to this, and I have been, and will continue to pursue that. But the school children should not be last in line. They should be first.”

“We are unable to comment right now because there are still a lot of moving parts on this and it’s not settled,” said Fernando Gallard, a spokesman for the School District.

Follow @JaredBrey on Twitter.

Editor’s Note: This post has been updated to include comment from state Senator Vincent Hughes.