Uber, Airbnb Fight Cities by Lobbying States

So-called pre-emption laws that supersede lower rungs of government have been successfully deployed on issues such as whether cities can regulate guns, raise the minimum wage or establish municipal broadband networks. But increasingly they have been sought to defend ride hailing and other hot-button consumer services.

City officials say municipal governments are generally in a better position to decide how ride-hailing and scooters fit into the overall transportation systems and whether residential dwellings can be used for tourism. Companies, lobbyists and more business-friendly politicians counter that city rules can be heavy-handed and resistant to innovation.

“Every city in the world now is dealing with this. They all have unique approaches to regulation, and we have states stepping in,” said Brumby McLeod, an associate professor at the College of Charleston’s business school who is studying pre-emption laws on nightly tourist rentals. “This isn’t a legislative idea. This is lobbying at the end of the day that’s driving this.”

Slow Response

The growth in ride hailing in particular caught many government agencies flat-footed. By the time cities had begun to respond to the upsurge in traffic driven in part by Uber and Lyft’s growth, the companies had insulated themselves from many local rules by passing legislation in more than 40 state legislatures.

Across the country, startups are trying to figure out which levels of government are best to woo. Bradley Tusk, Uber’s former political consultant who now invests in startups like Bird that face regulatory challenges, said startups sometimes can determine which levels of government regulate them by being proactive. “This can be the difference between war and peace, between someone who understands what you’re trying to do and someone who hates change,” he wrote in his forthcoming book, “The Fixer.”

Mr. Tusk, who declined to comment specifically on his work with Bird, added in an interview that “pursuing the state as a proactive tool won’t inherently lead to a bad image or bad press. Local officials may not love it. If you have state lawmakers saying how great something is, that’s a net win.”

The fight for jurisdiction will only intensify as new technologies and services are created. The Federal Aviation Administration has looked to write rules for drone operators that overrule local ones. Congress’ effort to allow for more testing of self-driving cars on public roads has made cities uneasy.

The tech companies in part are taking advantage of the widening political fissures between politically liberal cities and more conservative state governments. Financial disclosures show that a political action committee Airbnb started in Florida contributed about $25,000 in the past month mainly to political committees associated with state Republicans, who have been most supportive of expanding protections for its business.

Jeremy Elrod, a member of Nashville’s city council, had an up-close view of this pattern. A Democratic-leaning city in a conservative state, Nashville in 2015 saw its new ride-hailing laws that required strict background checks for drivers overruled by state legislators. Earlier this year, it became the latest city to pass tough laws on nightly tourist rentals, limiting real estate investors from operating Airbnb homes in residential neighborhoods. That law was subsequently blocked in part by the state. Airbnb spent between $150,000 and $200,000 on lobbying in the state in the first half of this year, a significant increase over its spending during the same period last year, filings show.  

Mr. Elrod said he hopes the city retains the authority to regulate e-scooters after passing a bill last month that he wrote that will limit scooter companies to about 1,000 scooters each. “We’re learning as a city from previous instances. We’ve gotten burned by these new industries, and we’re tired of it,” he said.

Uber and Lyft were able to lay a foundation for rapid growth around the country in part by pushing legislation in more than 40 statehouses that often limited cities’ regulatory powers, according to the National League of Cities. The companies successfully made the case that their businesses should fall under state jurisdiction because vehicles operated across city boundaries. In some cases, state agencies claimed jurisdiction without needing to be convinced.

“Everyone who worked at Uber acknowledges that is the argument we used back then, and it was wildly successful in every state for a statewide solution,” said Lane Kasselman, Uber’s former head of communications who is now managing partner of Greenbrier, a consulting firm that has done work for bike and scooter firms.

Scooters Join Fray

Scooter companies face a tougher fight getting strong state bills passed because they could struggle to win support from legislators in rural areas.

Emily Warren, Lyft’s former transportation policy director who now runs Lime’s policy operations, added that Uber and Lyft benefited from state-level decisions like California’s 2013 move to regulate ride-hailing vehicles at the state level while leaving taxis up to municipal control. For Lime and other scooter firms, however, “cities have clear authority to govern permitting in the public right of way” like sidewalks where scooters are parked, said Ms. Warren.

‘Every city in the world now is dealing with this. They all have unique approaches to regulation, and we have states stepping in.’

Lime and Bird, staffed by many former Uber and Lyft executives, have said they don’t intend to lobby for state rules that would pre-empt city authority, but will advocate at the state level for changes to motor vehicle codes that sometimes aren’t clear on how stand-up, electric-powered scooters can operate.

Still, Bird’s statewide lobbying rattled officials in Chicago and San Francisco by proposing legislation that cities opposed. The company sponsored a bill in the California legislature this spring that said cities and towns could regulate the operation of stand-up scooters, but didn’t spell out whether they had control over how scooters were parked. The city of Santa Monica, Bird’s first market, opposed the bill. It was eventually revised significantly in committee and passed as a law that removed the requirement for people 18 years or older to wear a helmet.

“Oftentimes, these kinds of state bills can be a precursor to a state-level effort to more aggressively pre-empt local authority. It’s worth watching, and it does make local governments very much on edge,” said Brian No, head of public policy for Spin, a scooter startup that has opposed state pre-emption rules.

A Bird spokeswoman declined to comment. A spokeswoman for Uber, which also has its own electric scooter and bike service, said the company believes that “scooters and bikes should remain the domain of the cities in which they operate.”

San Francisco has been one of the most aggressive cities in writing rules for scooter companies. The city last month approved two companies, Scoot and Skip, to pilot scooter services there. It barred high-profile startups Bird and Lime from operating after the city said the companies acted improperly by launching their services before rules were in place.

Scott Wiener, a state senator from San Francisco, told The Information that the local agency’s limits on scooters were an “overreaction.” He said he didn’t know yet what the state role was in regulating shared scooter and bike services, but was relieved that the state’s public utilities commission had taken control over ride-hailing rules several years ago. “We see local overreaction when there is no state standard,” he said.

But Mr. Wiener added that while he was a “supporter of home sharing,” he saw a less compelling state role for making rules on Airbnb-type rentals because they aren’t as fundamental to residents as access to transportation.

Lobbying Effort

That reality is one reason Airbnb hasn’t been as successful getting states on its side as ride-hailing firms. Just Arizona, Florida, Idaho, Indiana,  Tennessee and Utah have rules limiting how aggressively cities can regulate short-term rentals. Some of those state bills were eventually “watered down,” said Matt Curtis, HomeAway’s former policy chief who now runs a consulting firm called Smart City Policy Group.

Christopher Nulty, Airbnb’s head of public affairs for the Americas, said the company’s first priority was working with major cities to pass bills. It has tried to get laws passed at the state level when it has seen legislators interested in the issue, he said.

In Florida, Airbnb employed more lobbyists in the state this year than Walmart or Verizon as it rallied for a new pre-emption bill. Legislators put aside the issue after the high school shooting in Parkland redirected the state’s attention to the gun debate. But Airbnb and other short-term rental firms are expected to lobby again next year for policies in Florida that would further restrict cities’ regulatory authority.

Cities and towns in the state generally don’t want to ban short-term rentals, which help fuel Florida’s large tourism industry. But many are trying to distinguish between resort areas zoned for tourists and neighborhoods for long-term residents.

And states don’t always favor Airbnb. In New York, Airbnb’s top U.S. market, the company was burned by tough rules at the state level. It is trying to lobby the state to undo a 2016 law that blocks most short-term rentals in its biggest city. New York City passed rules to enforce that state law earlier this year.

Mr. Curtis said while Airbnb has “put a lot of money in building up a team and their lobbying resources” in states, its arguments are less compelling to state lawmakers. He said a state official told him in a hearing on a state bill once that ride-hailing firms don’t bother their constituents. A tourist rental “on your own block is pissing off the whole street,” the official told him.