Despite Threats From Uber and Lyft, Council Passes Airport Rate Hikes

The Phoenix City Council on Wednesday approved a rate hike for ride-share companies like Uber and Lyft to pick up and drop off customers at Sky Harbor International Airport.

Council members voted 7 to 2 in favor of the proposal despite criticism from a prominent conservative group, as well as threats from Uber and Lyft to end service at the airport over the fees next year. In the weeks leading up to the vote, the seemingly mundane issue of curbside fees blossomed into a showdown that raised profound questions about municipal rule, the future of Sky Harbor, and the business practices of the nation's two biggest ride-share companies.

Council members Sal DiCiccio and Jim Waring voted no. Council members Michael Nowakowski, Carlos Garcia, Thelda Williams, Laura Pastor and Debra Stark, as well as Mayor Kate Gallego, voted in favor of the fees.

Beginning on February 1, 2020, both pickups and drop-offs at Sky Harbor will cost ride-share companies $4. That's up from $2.66 for pickups. Currently, the airport does not charge for drop-offs. The fees will gradually increase to $5 by 2020 and will be tied to inflation after that. The rate ordinance does not specify who must pay the fees — the companies, the drivers, or the riders — but Uber and Lyft have both indicated that they would pass the costs onto customers.

Taxi companies will pay $1.75 per ride. Sky Harbor officials said they plan to charge ride-share companies more because they use more curb space, cause more traffic, and require more airport resources, such as staff. In addition, taxi companies are prohibited from passing airport fees onto customers.

Airport officials say they need the extra funds to help cover $26 million in annual costs associated with operating Sky Harbor’s ground transportation infrastructure, including road maintenance and repairs. Most of the funds — $18 million — would pay for maintaining the Sky Train, an electric rail that connects passengers from the 44th Street light rail station to the airport. Sky Harbor, supporters of the fee said, runs similar to a self-sustaining business, funding operations through its own revenue rather than the city of Phoenix's general fund.

Ride-share companies, as well as libertarian groups, launched an aggressive campaign against the fees this fall. Both and Lyft and Uber threatened to end service to the airport, repeating a common tactic they've used in other cities to protest regulations and ordinances that could hurt their bottom line.

The Goldwater Institute, a libertarian think tank with a strong influence on Arizona public policy, all but threatened legal action against the city of Phoenix over the fees, suggesting that the policy could violate a law that prohibits cities from taxing services. And Republican State Representative Nancy Barto indicated that she would call for an investigation by the state Attorney General into whether the fee violates that law.

During the meeting, Piper Overstreet, a representative from Uber, called the new rates an "inequitable tax fee proposal" and reiterated the company's promise to cease airport operations in January over the increase.

Responding to Overstreet, Mayor Kate Gallego named eight major cities where airports charge equivalent or higher fees than Phoenix's new rate, including Chicago, Dallas, Detroit, San Francisco, and Washington, D.C.

"Uber and Lyft have not pulled out of any of those markets," Gallego noted.

Council member Sal DiCiccio, the most vocal opponent of the fee hike, echoed Overstreet's claim that the fee amounts to a tax. "It’s a tax on the public. It’s a tax on the middle class, and it’s literally driving businesses out,” he said. "It’s morally wrong.”

The rate proposal followed a study of Sky Harbor's ground transportation needs, which included a review of such fees in other U.S. airports.

Completed this summer, the study found that fees from ground transportation companies in Phoenix pay a smaller portion of infrastructure costs than they do in other cities. The study also found that airports of comparable size charge companies for both pickup and drop-off, while Phoenix only charged for pickup.