DECISION

School Bus Operations

KEMPS BUS SERVICE, INC.,

Complainant,

v\.

LIVINGSTON-WYOMING CHAPTER OF NYSARC, INC.

Respondent

I. [Introduction]{.underline}

This decision is the conclusion an administrative complaint process
pursuant to 49 C.F.R. Part 605, Subpart D, initiated as a result of a
complaint received from Kemps Bus Service, Inc. (\"Complainant II)
against the Livingston-Wyoming Chapter of NYSARC, Inc. ("NYSARC
Respondent"). NYSARC Respondent receives Federal Transit Administration
(\"FTA") funding from the New York State Department of Transportation
C\'NYSDOT Respondent\") under the Elderly and Persons with Disabilities
Program, 49 U.S.C. Section 5310, as a subrecipient of NYSDOT. As a
result of our review of the submissions in the complaint process, FTA
has concluded that certain portions of NYSARC Respondent\'s operation
fail to comply with FTA requirements pertaining to school bus operations
at 49 U.S.C. Section 5323(f) and 49 C.F.R. Part 605.

II\. [Background Facts and Process]{.underline}

Complainant filed a complaint with this office dated August 26, 1998
alleging that NYSARC Respondent has violated the requirement not to
engage in school bus operations as a recipient of Federal funds under 49
U.S.C. Section 5301 et seq. According to Complainant, NYSARC Respondent
has bid on school bus contracts against Complainant, a private bus
operator. By letter dated September 2, 1998, FTA forwarded this
complaint to NYSARC Respondent and joined NYSDOT Respondent in the
process since NYSDOT is FTA\'s direct recipient.

NYSDOT Respondent, by letter dated September 10, 1998, provided its
response. This response stated that NYSARC Respondent is a subrecipient
in its 53 10 program and explained that on a prior occasion, NYSDOT
Respondent had found that NYSARC Respondent had engaged in school bus
operations with Section 5310-funded vehicles and instructed NYSARC
Respondent to

cease such operations. According to NYSDOT, this action occurred as a
result of a complaint filed by Kemps Bus Service, Inc. alleging illegal
school bus operations. In subsequent meetings between these entities, it
was agreed that NYSARC would discontinue school bus operations with
FTA-funded vehicles. NYSDOT Respondent, therefore, viewed the matter as
having been satisfactorily resolved because NYSDOT Respondent
interpreted the school bus regulation to only apply to operations using
Federally-funded vehicles. FTA forwarded a copy of NYSDOT Respondent\'s
September 10, 1998 response to Complainant, providing the thirty (30)
day period for rebuttal.

NYSARC Respondent submitted its response to the complaint by letter
dated September 24, 1998. In that response, NYSARC admitted to having
previously used Section 5310 vehicles for their school bus operations
although NYSARC stated that they have subsequently discontinued that
practice. According to NYSARC\'s response and the accompanying affidavit
of Joseph Antinore (\"Antinore Affidavit\"), NYSARC transports
handicapped children under the age of5, as well as school age children
to their own facilities, Head Start facilities, special education
destinations and destinations operated by others, pursuant to various
contracts, school board bids and with counties. In the Antinore
Affidavit, reference is made to an attached \"UMTA Grant\". Review of
this document indicates that it is not an \"UMTA grant\"; rather, it is
a copy of an agreement between NYSDOT respondent and NYSARC Respondent.

FTA forwarded a copy of NYSARC Respondent\'s response to the Complainant
by letter dated

October 6, 1998 to provide the opportunity for a rebuttal. Complainant
submitted its rebuttal replying to NYSARC Respondent\'s response by
letter to FTA dated October 12, 1998. Thereafter, NYSARC Respondent
submitted by letter dated October 16, 1998, a sur-reply to
Complainant\'s reply. By letter dated October 21, 1998, Complainant sent
a sur-sur-reply. The Complainant\'s sur-sur-reply correctly points out
that a sur-reply is technically beyond the formal administrative
complaint process. FTA, however, in the interest of refining the
respective positions of the parties, will take into consideration both
parties additional submissions.

III\. [Analysis and Determinations]{.underline}

NYSDOT, NYSARC and Complainant have each stated that in the recent past,
NYSARC Respondent engaged in impermissable school bus operations with
two Section 5310 vehicles. This aspect of the NYSARC Respondent\'s
school bus operations has apparently been resolved and, today, the
parties have narrowed the issue to NYSARC Respondent\'s continuing
engagement in school bus operations with privately financed vehicles.
NYSARC Respondent does not deny that it is engaging in the
transportation of children to schools using private vehicles[^1].
Instead,

NYSARC Respondent asserts that it is not required to abstain from school
bus operations with private vehicles. The crux of the difference between
the parties positions rests in their understanding of FTA\'s
requirements with respect to school bus operations for school districts
or counties using privately-financed vehicles or facilities.

FTA\'s statute, 49 U.S.C. Section 5323(f) expressly provides that:

> Financial assistance under this chapter may be used for a capital
> project, or to operate mass transportation equipment or a mass
> transportation facility, only if the applicant agrees not to provide
> schoolbus transportation that exclusively transports students and
> school personnel in competition with a private schoolbus operator.

Thereafter, the statute provides three (3) bases for exemptions from
this absolute prohibition on school bus operations. Similarly, the FTA
regulations, 49 C.F.R. Part 605, Section 605. 1(b) sets forth the
statutory purpose, as follows:

> By the terms of section 3(g) no Federal financial assistance may be
> provided for the construction or operation of facilities and equipment
> for use in providing public mass transportation service to an
> applicant unless the applicant and the Administrator enter into an
> agreement that the applicant will not engage in school bus operations
> exclusively for the transportation of students and school personnel,
> in competition with private school bus operators.

NYSARC Respondent finds \"implicit\" in these provisions an
interpretation that these requirements only apply to school bus
operations using Federally assisted assets. NYSARC points to Section
605.12 as indication that the school bus requirement is satisified if
its operations are not conducted with Federally funded assets[^2]. This
is not the meaning of Section 605.12. Such a limiting construction of
the regulatory framework would nullify other provisions of the
regulations. Further clarity as to the intent of this section can be
found in the Preamble to 49 C.F.R. Section 605, April 1, 1976:

> These regulations added a new Part 605 to UMTA regulations to protect
> private school bus operators who are in competition with
> Federally-assisted operators in providing transportation for school
> students \...the proposed regulations prohibited such bus operations
> by Federally-assisted operators [unless]{.underline} such operators
> were [expressly permittted]{.underline} under section 3(g) of the
> Urban Mass Transportation Act of
>
> 1964\... [Even]{.underline} if a Federally-assisted operator is
> [allowed]{.underline} to engage in school bus operations under one of
> the exemptions listed in section 3(g) and 164(b), the operator
> [cannot]{.underline} use Federally-assisted buses, facilities and
> equipment in those operations. (Emphasis supplied).

This illustrates that even if an affirmative showing has been made to
the Administrator to obtain an exemption pursuant to Section 605.11,
Federally-assisted assets cannot be used under any circumstances. If an
exemption has been granted, a recipient may engage in school bus
operations so long as it is done with privately financed assets. As
Complainant has pointed out, this construction, as well as the overall
purpose of the Act to protect private school bus operators from
competition, was recognized in [Chicago Transit Authority v.
Adams]{.underline}, 607 F.2d 1284, 1292 (7th Cir. 1979). Thus, the
statutory framework establishes that there is a total prohibition on
school bus operations, unless it is for \"tripper\" service as defined
therein[^3] or the Administrator has granted an exemption in accordance
with Section 605.14 for school bus operations using non-Federally
assisted assets.

Moreover, FTA has made a clear distinction between requirements which
only prohibit the use of Federally-assisted assets and general
prohibitions as to types of activities. For instance, in 49 C.F.R. Part
604, the Charter regulations, \"charter service\" is specifically
defined as \"transportation [using]{.underline} buses, vans, or
facilities funded under the Acts\" (emphasis supplied). This is in
direct contradiction to the School Bus regulations that define \"school
bus operations\" as \"transportation by bus exclusively for school
students, personnel and equipment\". This again reveals the clear intent
behind the express language of both the statute and the regulations.

Lastly, FTA\'s certification and assurance process requires all grantees
annually to make certain assurances to FTA prior to receipt of Federal
assistance. In one such certification and assurance entitled \"School
Transportation Agreement\", a grantee agrees to engage in school
transportation operations [only to the extent permitted by one of the
exemptions]{.underline} outlined in the regulations. Neither NYSDOT
Respondent or NYSARC Respondent have argued that they have such an
exemption in place, nor would they appear to qualify to fit within one
of these categories to apply for such an exemption.

IV\. [Conclusion and Order]{.underline}

NYSARC Respondent, NYSDOT Respondent\'s subrecipient, has conducted and
is continuing to conduct some school bus operations in violation of the
FTA statute and its regulations. Accordingly, FTA finds that NYSARC is
conducting impermissible exclusive school bus operations.

Therefore, NYSARC is ordered to cease and desist from conducting school
bus operations which are in violation of FTA\'s school bus regulations.
NYSDOT is ordered to ensure that its subrecipients, including NYARC, are
complying with the school bus regulations. Further, in accordance with
49 U.S.C. Section 5323(f)(2), an applicant violating the school bus
provisions may not receive other financial assistance while not in
compliance with FTA requirements. Therefore, NYSDOT Respondent shall
provide a written report to FTA within thirty (30) days on the status of
compliance by its subrecipients and the measures it is taking to ensure
compliance.

Dated this 16 day of November 1998.

Letitia Thompson

Regional Administrator

[^1]: NYSARC in part argues that the handicapped children it transports
    are too young to be considered school age. Similarly, NYARC
    maintains that some of the destinations are not \"schools\" as
    intended to be covered by the school bus regulations. According to
    the Antinore Affidavit, some school transportation is done within
    the Head Start program. It is correct that transportation funded
    under contracts where they are reimbursed by Head Start funds, if
    done in accordance with FTA\'s charter regulations, would be a
    permissable exception to the charter regulations; therefore, this
    decision will only address those contracts for transportation of
    handicapped children reimbursed by county or school districts, as
    these would be contemplated by the school bus regulations. Although
    the parties have narrowed their argument to the issue of school bus
    operations using private vehicles, NYSARC Respondent\'s has also
    alluded to another argument that the activites complained of herein
    do not fall within the scope of the school bus regulations because
    they involve the exclusive transportation of handicapped children.
    This line of reasoning is inconsistent with recent FTA decisions on
    school bus service. See FTA letter of May 4, 1989 to the State of
    New Hampshire.

[^2]: NYSARC also relies on an administrative decision by NYSDOT, Case
    32280; however, to the extent that this decision touches upon some
    of the issues herein, a State entity considering a Federal
    regulatory scheme is not persuasive.

[^3]: Further illustration of this point can be found in the October 12,
    1982 Advance Notice of Proposed Rulemaking (ANPRM) in the Federal
    Register. Although this ANPRM was finally withdrawn on Jan. 4, 1990,
    it further supports this broad interpretation of the school bus
    operation ban.