Coalition kicks cronies in Springfield showdown over car-sharing

The formula for bad economic policy in Illinois is pretty simple. State lawmakers have the power to offer special privileges. Moneyed interests from legacy industries go to the state capital in search of them. A few businesses get protections, carve outs or subsidies. Politicians get money, favors or a new job.

But something interesting just happened on one of the most hotly contested bills of the year, with a legacy industry fighting to crush startup competitors providing needed income to nearly 10,000 Illinoisans.

Cronies lost.

The story started back in February. A bill on liability laws in the car rental industry was making its way through the Illinois Senate. It wasn’t anything special, but a few amendments in May completely transformed that bill into a weapon for companies like Enterprise to punish startup competition.

What competition? App-based businesses like Getaround and Turo allow vehicle owners to rent out their car to people looking for one. So for car rental companies unwilling to adapt, smartphones can cut into their role as middleman.

Enter a bill that would give Illinois the most draconian law in the nation governing these peer-to-peer car rental services, or “car-sharing.” Essentially, it treated car-sharing businesses like traditional car rental companies in all the ways that would hamper their success, including a crushing tax burden, but left out the special perks that traditional car rental companies enjoy in Illinois, such as a sales tax exemption on all the vehicles they purchase.

With that bill on the table, car rental companies primed the pump with plenty of money for both sides of the aisle. And voila, the bill ended up on Gov. Bruce Rauner’s desk.

Rauner’s administration saw which way the wind was blowing. Vetoing the bill outright meant they’d almost certainly get beat with an override vote, given the bill passed with strong support in both the House and Senate. So they brought together a coalition, including car-sharing companies like Getaround and Turo and businesses with skin in the game like Allstate and General Motors.

They came up with a framework of their own, and issued an amendatory veto in August. The new proposal kept the car-sharing tax burden relatively low and ensured the new industry could compete on a level playing field.

DePaul University Professor Joe Schwieterman, director of the Chaddick Institute for Metropolitan Development, called the reforms a “best practice” for how states should deal with car-sharing. The original bill was “overly intrusive” and “would have harmed thousands of customers.”

Car rental companies weren’t going to take that lying down. The race for an override was on. Both sides of the fight ran ads in major political newsletters, fed hostile stories to media outlets and tried to get customers involved in the fight, not to mention all the political money.

Former state Sen. Pam Althoff – a co-sponsor of the car-share-killing bill – quit her job as a lawmaker in September, immediately started a lobbying business and took Enterprise as a client.

On Wednesday, the dust settled.

Enterprise, Althoff and the other overriders didn’t have the supermajority votes they needed. The coalition beat the cronies. More reasonable regulations are moving forward.

For some people, the way special favors are normally doled out to special players in Springfield is called being “pro-business.”

But true business friendliness comes from things like simple, equally applied rules and good bang for your tax buck. Illinois is far from that. So it hangs around the bottom of small-business surveys and lags far behind the rest of the nation in jobs growth.

The car-sharing victory is real business friendliness. And that means Illinoisans – whether or not they ever rent their car through an app – have cause for a little celebration.