Hampton Roads gets a Lyft; defiant company gets fine

April 29--VIRGINIA BEACH -- A trendy taxi-like service that provides rides through a smartphone app and uses part-time "community" drivers in their personal vehicles defied state regulators when it expanded into Hampton Roads last week, according to correspondence released by the Department of Motor Vehicles.

The action drew a swift response by the DMV. On Monday, the agency levied a $9,000 civil penalty against Lyft, a San Francisco-based company that is known for the large pink mustaches that its drivers attach to the fronts of their cars.

A DMV official explained the penalty in a letter to a Lyft manager in California. It said the company has not applied for a broker's license to transport passengers in Virginia despite the DMV's attempts to inform Lyft of the requirement.

The letter, a copy of which the DMV provided to The Virginian-Pilot, noted that Lyft held a launch party Friday at The Public House, a pub in Norfolk, to kick off operations in the area and distributed coupons valued at up to $25 for free rides.

The company has faced opposition in other markets for its nontraditional business model as it moved into dozens of cities since its inception in 2012. It launched operations in Hampton Roads after weeks of advertising for local drivers.

The company uses people who provide rides in their spare time and are rated by their passengers. A Lyft spokeswoman said in an email last week that the drivers operating in Virginia Beach include a police officer, a music producer and a member of the Coast Guard. She did not specify where the officer works.

Lyft's foray into the region came as state lawmakers and DMV staff members were trying to figure out how to deal with it and other app-based transportation services, such as Uber.

Del. Ron Villanueva, a Virginia Beach Republican, introduced legislation this year to relax certain regulations to accommodate such businesses. The bill was continued for a year so the DMV could study the issue.

Villanueva said Monday that traditional motor carriers, such as taxi companies, have a valid argument in their protestations about Lyft and similar companies not having to abide by the same rules.

"It could work in Virginia as long as it's done right," he said.

Paige Thelen, a Lyft spokeswoman, said last week that the company should be treated as a new model rather than as a traditional taxi service. She said its drivers are screened, their vehicles are inspected and the company provides each driver with as much as $1 million in excess commercial liability insurance -- more than five times the minimum required on taxis in Virginia, she said.

Frank Azzalina, director of business development for Hampton Roads Transportation, a taxi dispatcher, said those inspections and background checks are not done by the police, as is done for cabs and their drivers.

"Ignoring the law is crucial to their success," Azzalina said of Lyft.

He said there are about 250 taxi permits in Norfolk. There are 210 cabs permitted in Virginia Beach, according to the police.

Emails released by the DMV in response to a Freedom of Information Act request show that an agency official had been communicating with a Lyft representative since January about getting the company to comply with state regulations.

Rena Hussey, assistant commissioner for Motor Carrier and Tax Services, told the Lyft representative in February that Virginia prided itself in being a business-friendly state, and the DMV did "not want to stand in the way of innovative solutions to combat congestion on our highways."

However, she wrote, the DMV felt strongly that state laws did not allow for-hire transportation services such as Lyft if they did not follow Virginia's motor carrier, broker licensing and registration requirements.

Hussey noted the potential repercussions for operating in violation of those requirements. She provided links to the state's criminal and civil penalties, as well as information on a 12-month licensing ban that will take effect July 1 for anyone found to be operating without the necessary paperwork.

The Lyft representative, Joseph Okpaku, the company's manager of government relations, wrote back on April 2. He said that according to their research, the DMV could grant temporary authority for Lyft to operate in the state in anticipation of legislative action next year.

Hussey replied the following day, saying the DMV did not believe the code section that Okpaku cited was applicable. Temporary authority is intended only for service for which there is an immediate and urgent need, and there are no certified carriers to perform the service. The DMV saw no such need and no such lack of providers in this case, she wrote.

The email was Hussey's last written correspondence with Okpaku. The notice of the $9,000 penalty included references to eight fee-for-hire trips arranged through Lyft's phone app in January and March in Northern Virginia.

Thelen said by email Monday that Lyft has seen a positive response from the Virginia Beach community about Lyft's arrival "as a fun, reliable and safe transportation option," and that the company looks forward to working with local officials to find a solution.

Several Beach City Council members said they've received complaints about the company, including from taxi companies concerned they're skirting state and local regulations. Police Chief Jim Cervera recently met with some of the taxi companies, so "the Police Department is aware that this is a brewing issue," said Kathy Rountree, the city's public safety attorney.

The City Attorney's Office is looking into the issue. Azzalina said he is meeting this week with city officials from Norfolk and an assistant attorney general.

In Virginia Beach, each Lyft driver, who is considered an independent contractor, would need a "transportation arrangement" business license, which typically costs $40 to $50, said Commissioner of the Revenue Phil Kellam.

None of Lyft's drivers had applied for a city business license as of late Monday afternoon, Kellam said. They need that paperwork, even if they aren't charging for rides yet, he said.

"Nobody should be getting in a car with and traveling with anyone with a pink mustache on the front unless they present a business license," Kellam said.

Pilot writer Kathy Adams contributed to this report.

Dave Forster, 757-222-5005, [email protected]

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