BEFORE THE FEDERAL TRANSIT ADMINISTRATION

Illinois School Transportation Association,

Complainant,

v\.

Pekin Municipal Bus Service,

Respondent.

Charter Service Complaint

49 U.S.C. Section 5323(d)

49 U.S.C. Section 5323(f)

Charter No. 2006-06

School Bus No. 2006-01

DECISION

[Summary]{.underline}

On May 19, 2006,[^1] the Illinois School Transportation Association
(ISTA) filed a complaint with the Federal Transit Administration (FTA)
against Pekin Municipal Bus Service (PMBS), a recipient of Section 5309
funds. ITSA alleged violations of FTA\'s school bus and charter
regulations, 49 U.S.C. Sections 5302(a)(l0); 5323(d) and 5323(f) as
amended and 49 Code of Federal Regulations (CFR) Parts 604 and 605. ITSA
alleged that PMB S had directly and unfairly competed against private
school bus operators by operating non-public transportation services out
of an operating facility/headquarters that utilized FTA funds for
operating purposes.

On June 2, 2006, FTA directed the parties to seek informal conciliation
of the charter complaint pursuant to 49 C.F.R Section 604.15. The
conciliation was unsuccessful.

On July 24, 2006, FTA received PMBS\' response to the complaint filed by
ISTA. PMBS claims that while both units of PMBS, School Bus and
Municipal Bus, operate out of one facility, the units are separate and
distinct from each other. PMBS further claims that they have established
and designated separate garages and equipment for each unit as well as a
separation of parts and labor used to service the vehicles of the
separate units. On August 29, 2006, ISTA filed their rebuttal.

FTA scheduled and conducted a Financial Management Oversight Review and
issued a draft report in July 2007. Because a number of issues in the
report related to the financial arrangements of the PMBS, FTA was
waiting to issue this decision until after the FMO Review was finalized.
However, because of continued delays with finalizing the FMO Review, FTA
did not want to delay this decision any longer. PMBS has had an initial

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opportunity to respond to the findings and FTA is comfortable that it
has enough information at this time to make a determination on this
complaint.[^2]

Upon reviewing the allegations in the complaint and the subsequent
filings of all the parties, FTA has concluded that PMBS illegally
operated school bus and charter service. The remedy in this case is to
order PMBS to immediately cease and desist from operating illegal
charter and school bus service. However, due to the fact that as of
March 5, 2007, the City of Pekin ceased operating its bus services and
transferred those responsibilities to the Greater Peoria Mass Transit
District, the remedy is now moot.

[Complaint History]{.underline}

On May 19,2006, lSTA filed a complaint with the FTA against PMBS.[^3]
ITSA alleged violations of 49 U.S.C. Sections 5302(a)(10); 5323(d) and
5323(f) as amended and 49 CFR parts 604 and 605 as they relate to the
operation of prohibited school bus and charter service. 1STA alleges
that PMBS bids against private school bus companies and operates home-to
school and related charter service. ISTA further alleges that all PMBS
FTA-funded public and non public transportation services are fully
integrated, operated, and maintained out of a single facility under one
management. Complainant provided copies of correspondence and bid
documents detailing charter service provided to Pekin Community High
School District #303, Boy and Girls Club, and the University of Illinois
Extension. In addition, 1STA provided photographs of different vehicles
leaving the City of Pekin compound where all the city\'s vehicles are
stored and maintained, including photographs of yellow school buses with
the words \"Pekin Municipal Bus Department\" on the side of the bus.

On May 24, 2006, FTA advised both parties that the Greater Peoria Mass
Transit District (GPMTD) would investigate the matter. On June 2, 2006,
after reviewing the complaint further, the Region V Administrator
informed both parties that FTA would proceed with the investigation and
no further action would be required of GPMTD.[^4] FTA directed the
parties to seek informal conciliation of the complaint pursuant to 49
CFR Section 604.15. The Parties were unable to successfully conciliate
the complaint.

On July 24, 2006, FTA received PMBS\' response to the complaint filed by
ISTA. PMBS claims that while both units of PMBS, School Bus and
Municipal Bus, operate out of one facility, the units are separate and
distinct from each other. PMBS further claims that they have established
and designated separate garages and equipment for each unit as well as a
separation of parts and labor used to service the vehicles of the
separate units.

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Respondent provided copies of FTA\'s Triennial Reviews in 1999, 2002,
and 2005 which found that PMBS was in compliance with both school bus
and charter bus requirements. PMBS also provided audits relating to the
operation of the municipal busses and the funds associated with them and
an Affidavit of James Warning, a Certified Public Accountant, who
attests to the separate accounting systems for the municipal and school
bus funds and to the fact that all federal grant money received from the
FTA was used solely for the operation and maintenance of the municipal
bus service.

On August 29, 2006 ISTA filed a rebuttal to PMBS\'s response. The
complainant reiterated that the two systems, the school bus and
municipal bus systems, commingled their operations, stored the buses in
the same facility, and were managed by the same individual. Attached to
the rebuttal is a spreadsheet showing the City of Pekin\'s budget for
Fiscal Year 2008.

In January 2007, FTA began an on site Financial Management Oversight
(FMO) Review of PMBS. The draft report was issued on July 3, 2007. On
September 25, 2007, the City of Pekin responded to the draft report.
Because FTA was not satisfied with the City of Pekin\'s response, on
October 4, 2007, asked for additional time to provide a supplemental
response. However, FTA believes it has enough information to rule on the
pending charter and school bus complaints at this time.

[Discussion]{.underline}

The issue before FTA is whether PMBS has adequately separated FTA-funded
public bus service and non-public transportation services. Under 49 CFR
Parts 604 and 605 and 49 U.S.C. Sections 5302 and 5323, recipients of
FTA funds are prohibited from providing charter service or school bus
transportation service unless the service falls under a specific
exception. PMBS is not alleging that the service falls under a
regulatory exception, but rather that it was operating a completely
separate system.

FTA must make a fact-based determination of whether PMBS\' FTA-funded
public and non-public transportation services are integrated, operated
and maintained out of a single facility under one management as the
Complainant alleges or was two separate operating bus systems as PMBS
alleges. While the FMO was able to determine that there were two units
or divisions of bus service operating and that in all likelihood its
operations and maintenance were kept separate, the two services were
both operated under the City of Pekin umbrella. The buses were stored on
City of Pekin property and the two services had the same manager
overseeing operations. The fact that the school buses had printed on the
side of the bus, \"Pekin Municipal Bus Department\" and the website
stated that the City of Pekin\'s Vehicle Maintenance Division was
responsible for maintaining all Pekin city vehicles, including school
and municipal bus makes it difficult to find that the two systems were
completely separate.

FTA considers a number of factors in determining whether a recipient of
FTA funds is able to operate two separate services. These factors
include, but are not limited to, insurance, salaries, workers
compensation, training, supplies, labor, distribution of funds,

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and other resources. Looking at the totality of the evidence, FTA does
not believe that PMBS was operating two completely separate systems.

Under 49 C.F.R. Part 604, a recipient of FTA operating assistance is
prohibited from providing charter service unless one of the regulatory
exceptions applies. PMBS is not alleging an application of a regulatory
exception.

Under 49 CFR Section 605, a recipient shall enter into an agreement with
FTA that it will not engage in school bus operations exclusively for the
transportation of students and school personnel, in competition with
private school bus operators unless it operates a separate and exclusive
school bus program. The regulations allow a recipient to provide
\"tripper\" service, but the service provided by PMBS was exclusive
school bus service in direct competition with private school bus
operators, not regular fixed route \"tripper\" service.

[Conclusion]{.underline}

FTA based on a review of all the evidence concludes that for all intents
and purposes, there really was only one bus service operated by PMBS. As
a recipient of federal assistance, PMBS violated the charter and school
bus regulations by operating a bus service that included both charter
and school bus. Therefore, FTA finds that PMBS violated both 49 CFR Part
604 and 605.

[Remedy]{.underline}

PMBS terminated Municipal Bus Service on March 2, 2007, and is no longer
a recipient of FTA funds. Therefore, although FTA orders PMBS to
immediately cease and desist providing charter and school bus service,
the impact of the cease and desist order is essentially moot.

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[Appeal]{.underline}

In accordance with 49 C.F.R. § 604.19, the losing party may appeal this
charter decision within ten days of receipt of the decision. The appeal
should be sent to James Simpson, Administrator, FTA, 1200 New Jersey
Avenue, SE, 5th Floor-East Building, Washington, D.C. 20590.

In accordance with 49 C.F.R. § 605.35, this school bus decision is final
and conclusive on all parties, but is subject to judicial review
pursuant to title 5 U.S.C. 701-706.

Marisol Simon

Regional Administrator

Nancy-Ellen Zusman

Regional Counsel

October 16, 2007

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[^1]: Because ISTA filed only one complaint alleging violations of the
    school bus and charter regulations, FTA has issued two complaint
    numbers, but is only issuing one decision.

[^2]: The draft FMO Review found a number of material weaknesses,
    including but not limited to charging insurance and payroll to
    preventative maintenance which are ineligible expenses.

[^3]: PMBS was a recipient of capital and planning funds; therefore, it
    was required to comply with the charter and school bus regulations.

[^4]: PMBS is a subrecipient of GPMTD, who is a direct recipient of its
    federal grants. FTA has delegated charter violations to recipients
    for investigation. However, given the combined nature of the school
    bus and charter violations, as well as the fact that GPMTD has
    assumed the bus operations for PMBS, FTA chose to handle this case
    itself.