Minneapolis Council Considers Spending Tax Dollars on New Rideshare Companies as Uber, Lyft Prepare to Abandon City

Amid intense blowback over a new local law that is driving Uber and Lyft to pull out of their city, some members of the far-left Minneapolis City Council are proposing to spend $150,000 to seed small, upstart transportation companies looking replace the rideshare giants.

The proposal, which is slated for discussion during the council’s budget meeting on Monday, would dedicate $150,000 in unobligated general-fund money “for small business financing for transportation network companies,” according to a resolution by four council members.

In the weeks since the council jacked up mandated pay rates for rideshare drivers, leading Uber and Lyft to announce their departures from Minnesota’s largest city, several small companies have “expressed eagerness” to begin operating in Minneapolis, according to a background document submitted with the proposal. “These emerging and expanding businesses are ready to comply with city ordinances and pay minimum wage equivalents,” the document says.

But many Minnesota leaders remain highly skeptical that any new company can scale up and be ready to take Uber and Lyft’s place by May 1, the date they’ve announced they’re leaving Minneapolis. Uber has said the company will be exiting the entire Twin Cities metro area.

“We have what I can only describe as magical thinking that in the next 30 days, somebody’s going to create a new app that folks around the world and country are going to know to use when they come to Minneapolis, and they’re going to figure out how to make the economics work on that,” Tim Walz, the state’s Democratic governor, said on Monday, according to a CBS News report. “So I’ve been asking all the folks to get back to the table.”

Omar Adan Ahmed, vice president of the Minnesota Rideshare Association, or MRDA, which has opposed the Minneapolis council’s action, told National Review that expecting some small, relatively unknown company to replace Uber and Lyft in a few weeks is “far-fetched.”

“Uber is an international organization. Lyft is an international organization that has been background-checked, security-oriented, client-friendly and reliable,” Ahmed said.

He said he’s working with lawmakers on a possible statewide solution that would be “friendly with clients, friendly with Uber, friendly with my organization of most rideshare drivers.”

Uber and Lyft have been operating in the Twin Cities for a decade and provide over 1 million rides per month there. Many residents, including older people and people with disabilities, rely on the companies’ drivers to get to work and to medical appointments.

But in early March both companies threatened to leave Minneapolis after the Minneapolis council upped driver-pay requirements to $1.40 per mile and 51 cents per minute. Councilmembers said it was necessary to ensure drivers earned the equivalent of Minneapolis’s $15.57 minimum wage. But they determined the new pay rates without requesting local data from Uber and Lyft and they didn’t invite company leaders to engage in their process.

They also didn’t wait for the release of a state labor study on the matter. A day after the Minneapolis council jacked up pay requirements, the state study was released that found that drivers could earn the equivalent of the minimum wage if they are paid 89 cents per mile and 49 cents per minute, far below the council’s rates. Upping that to $1.21 per mile and 49 cents per minute could afford them benefits, including paid leave and health insurance.

In response to public backlash, some Minneapolis council members have expressed a willingness to revise their ordinance to better align with the state data.

Still, some Twin Cities leaders are preparing for chaos if Uber and Lyft do leave. There are only 39 licensed cab drivers left in Minneapolis, according to the Star Tribune newspaper.

With Uber and Lyft preparing to leave the Minneapolis market, at least ten smaller companies have emerged hoping to fill the void. The companies — including Empower, Joiryde, U Got Wheelz, and Wridz — have little name recognition. Some are operating in other cities, including New York and Washington D.C., but not always without controversy; city leaders in Washington, D.C., have warned riders not to use Empower’s app because it’s not licensed there, according to the Minnesota Reformer. Empower says its not a transportation network company like Uber and Lyft, but instead is a booking agency like Expedia is for hotels, according to the Reformer.

Some of the smaller companies are Minnesota-based. Some have only a handful of employees or drivers, or won’t say how many employees or drivers they have. Some require drivers to pay a monthly or daily subscription fee.

In addition to the private companies, in late March a group of drivers with the progressive Minnesota Uber/Lyft Drivers Association announced that they are launching a rideshare driver co-op. The co-op has operated in New York City for a few years, according to news reports. In that time it has provide 300,000 rides in New York City, far fewer than Uber and Lyft provide in a single month in the Twin Cities.

“Basically, if Uber and Lyft want to leave, they’re okay to leave because we have choices now,” said Marianna Brown, MULDA’s vice president, according to the Star Tribune. “We’re not going to be intimidated, we’re not going to be threatened by them.”

Quickly replacing Uber and Lyft will likely be harder than supporters acknowledge.

None of the companies looking to step in have ever operated at Uber and Lyft’s scale. They aren’t well known to drivers or customers. They’ll need prove that their apps work consistently. They’ll have to show that they can be reliable players in a field where Uber and Lyft have struggled to be profitable. And they’ll need capital to pay for expensive licensing fees, insurance, and background checks on their drivers, among other costs.

It’s unclear if any of the smaller firms have agreements with car-rental firms like Uber and Lyft do. Hertz recently announced it is ending its car-rental program for Uber and Lyft drivers in the Twin Cities ahead of the companies’ announced departures on May 1.

Dan Fragola, a Twin Cities Lyft driver, said he is confident he can continue to make a living by driving in St. Paul and the suburbs.

“I’m not someone who sits around and waits. I’m a hustler. I find the areas, and I know I could make a living without entering Minneapolis,” he told National Review.

Fragola is skeptical of the proposed co-op and the small companies looking to enter the market, though he’s not opposed to the startups trying. If one of the startups is “kicking ass in Minneapolis,” he’d be open to driving for it, in addition to staying with Lyft, he said.

“I don’t want to be a guinea pig for it, though,” he said. “I’m not going to be the iron out the wrinkles guy.”

Fragola was one of the nearly 400 Twin Cities Lyft drivers who signed a petition opposed to the city council’s ordinance. He said he makes a good living as a driver.

The drivers who say they aren’t making minimum wage and who pushed the Minneapolis council to mandate the pay hike “are just absolutely lazy people,” he said.

“It will be horrible,” if Uber and Lyft do leave the area, Fragola said. But he’s still optimistic they’ll end up staying, because “there’s way too much money here.”