Leap Transit shut down by the state for operating illegally

Video: Leap Transit is Gaming the System

The state has forced Leap Transit to halt operations for running its luxury bus line without a permit.

Leap announced on Tuesday that it has temporarily suspended service after the California Public Utilities Commission served the company with a cease-and-desist order on May 11.

Before the shutdown, Leap was in the process of obtaining a permit from the commission. The startup was recently granted what’s known as the “authority to operate” — a precursor to an official license. But by driving its route between the Marina district and the Financial District without a license, regulators determined that Leap was breaking the law.

The cease-and-desist order came one day after The Chronicle published a story illuminating the legal gray area in which the company operates.

At that time, the PUC said that Leap technically falls under city regulation pending the approval of its state permit, while the city said that it had already handed over regulatory authority to the commission.

Now, it seems, the PUC has decided authority of Leap falls to the state even before its license is finalized.

In this April 14, 2015 photo, Leap commuters use their smartphones during a bus ride in San Francisco. A company called Leap, a bus company that offers rides with spacious seating, free Wi-Fi and attendants who deliver snacks, launched the service last month with morning and evening commutes that follow public bus routes between the tony Marina district and the heart of downtown San Francisco. (AP Photo/Jeff Chiu) less In this April 14, 2015 photo, Leap commuters use their smartphones during a bus ride in San Francisco. A company called Leap, a bus company that offers rides with spacious seating, free Wi-Fi and attendants who ... more Photo: Jeff Chiu / Associated Press Photo: Jeff Chiu / Associated Press Image 1 of / 18 Caption Close Leap Transit shut down by the state for operating illegally 1 / 18 Back to Gallery

In previous comments to The Chronicle, Leap CEO Kyle Kirchhoff said he believed that Leap’s service was legal because its current route doesn’t leave San Francisco. The company was in the process of seeking PUC approval due to plans to eventually expand to San Mateo County.

With its $2.5 million in venture capital, Leap is among a growing class of private shuttles in San Francisco that also includes Chariot and Loup. The idea is to cater to commuters who are willing to pay a premium to avoid the unpleasantries of public transit. Leap rides cost $6 and an app controls every aspect of the experience — from displaying schedules to ordering $7 cold-pressed juice on-board.

The city recently approved a study to determine how to regulate such services, but Leap instead chose to follow the path of startups like Uber by seeking state regulation, which has the potential for less oversight than city regulation.

The cease-and-desist notice said that operating prior to receiving a state permit is a misdemeanor punishable by up to one year in county jail or a fine of $5,000.

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According to the notice, Leap also failed to comply with safety regulations, including mandated California Highway Patrol bus inspections and a Department of Motor Vehicles program monitoring driver safety.

Leap has faced criticism for removing wheelchair accessibility for its buses, which is required by federal law.

To receive its permit, the notice said, Leap must comply with several state requirements, including filing proof of insurance and drug and alcohol testing for drivers.

Leap did not return a request for comment, but a posting on the company’s Facebook page said that Leap “is in full compliance with all state and local laws” and that service will remain offline through at least the end of the week while it straightens out “clerical issues” holding up its permit.

Last week, the company also briefly pulled service in order to make “a few minor changes” and take care of “some general maintenance,” according to Kirchhoff. The company resumed its service later in the week with a $2 fare special and expanded service.

Kristen V. Brown is a San Francisco Chronicle staff writer. E-mail: kbrown@sfchronicle.com Twitter: @kristenvbrown