Now that Gov. Gavin Newsom has signed a bill that will reclassify independent contractors as regular employees, gig economy companies, such as Lyft and Uber, are expected to react with heightened fees to cover the higher costs of compensation.
Already, this is playing out in Monrovia, which has a partnership with ride share company Lyft for its GoMonrovia transportation program. The city will up its fares on Nov. 1 by 50 cents in anticipation of increased costs from the ride hailing company. The City Council unanimously approved the pricing shift Sept. 17, one day before the governor signed off on Assembly Bill 5.
It’s a “preventative measure to make sure the city has some financial flexibility” once the law starts to dictate Lyft’s pricing structure, Oliver Chi, former city manager for Monrovia, said last month before he left.
The new law “has the potential to increase costs by $800 million in one year for companies that aren’t really making money to begin with,” he said.
“Since about 60% of costs go to paying drivers already, they’re going to come to the customers of the platforms with higher fares,” Brittany Mello, assistant city manager for Monrovia, said.
El Monte next month will decide on a possible $30 minimum wage for ride share drivers and Los Angeles is considering the same, suggesting a $15 hourly base rate with another $15 every hour for business expenses.
Currently, GoMonrovia offers $2.50 shared Lyft rides, $5 solo rides and 50-cent rides to and from the city’s Gold Line station and anywhere in Old Town Monrovia. Come Nov. 1, Lyft rides through GoMonrovia will cost $3 in the general service area and $1 for rides to and from the Gold Line, Old Town Monrovia and area hospitals, Mello said.
The shift will generate about $180,000 over a year for the city’s transit budget, Chi said.
This isn’t the first price adjustment the city has imposed on GoMonrovia, which launched in March 2018. In the pilot stage, Lyft rates were 50 cents per ride to and from Old Town and the Gold Line station, 50 cents for shared rides and $3 for standard rides.
When the city shifted ride costs in May, 50-cent rides to and from Old Town Monrovia and the Gold Line station were maintained, while shared and standard rides rose $1 to $2.
It won’t be the last upward price shift either, Chi said.
Although the city has $1.2 million in restricted funds to use for GoMonrovia expenses, the budget is so tight that any change from Lyft or the state will require a corresponding price adjustment to the city’s program, he added.
“This program has been in the red for some time,” Mayor Tom Adams said. Raising GoMonrovia fares is “more about catching up than reacting to Sacramento,” he added.