BEFORE THE FEDERAL TRANSIT ADMINISTRATION

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

Docket Nos. 2002-01, 2002-04, and 2002-10

Indian Trails, Inc., Classic Caddy Limousine,

and The Tecumseh Trolley & Limousine,

Complainants,

Capital Area Transportation Authority, Respondent.

DECISION

[Summary]{.underline}

On March 7, 2002, Classic Caddy Limousine (\"Classic Caddy\") filed a
complaint with the Federal Transit Administration (\"FTA\") alleging
that Capital Area Transportation Authority (\"Respondent\") is providing
service in violation of FTA\'s charter regulation, 49 Code of Federal
Regulations (C.F.R.) Part 604, as well as improperly leasing its
vehicles. Classic Caddy followed up with some additional information on
March 27, 2002. The service specifically complained of pertains to
Respondent\'s use and leasing of its trolleys for charter service.
Respondent filed an answer dated May 1, 2002. Complainant filed a reply
on June 13, 2002.

On April 1, 2002, The Tecumseh Trolley & Limousine (\"Tecumseh
Trolley\") filed a complaint with the FTA alleging that Respondent is
providing service in violation of FTA\'s charter regulation, 49 C.F.R.
Part 604, as well as improperly leasing its vehicles. On July 9, 2002,
Tecumseh Trolley filed additional information with the FTA.

On June 20, 2002, Indian Trails Incorporated (\"Indian Trails\")
submitted a letter to the American Bus Association complaining about the
Respondent providing unauthorized charter service. FTA was also provided
with a copy of the information. On July 16, 2002, FTA consolidated the
three complaints and asked that the Respondent answer a number of
questions related to its trolleys. On August 14, 2002, the Respondent
requested a thirty (30) day conciliation period and an extension for
filing its response to the consolidated complaints. On August 15, 2002,
FTA granted the request for the conciliation period, but denied the
request for an extension. On August 16, 2002, Respondent filed its
response to the three consolidated complaints. The thirty (30) day
conciliation period, which ended on September 14, 2002, did not result
in a settlement.

Upon reviewing the allegations in the three complaints and the
subsequent filings of all three of the Complainants (Classic Caddy,
Tecumseh Trolley, and Indian Trails, hereinafter are referred to
collectively as the \"Complainants\") and the Respondent, FTA has
concluded that the service in question does violate FTA\'s regulations
regarding charter service. Respondent is hereby ordered to cease and
desist in providing such illegal service. Respondent is also ordered to
disallow improper charter mileage for the vehicles to be used for the
purposes of calculating useful life.

Complainant Classic Caddy filed its complaint with the FTA on March 7,
2002, and provided follow up information on March 27, 2002. The
complaint alleges that the Respondent is providing illegal charter
service[^1] by providing private charter service using its trolleys, as
well as improperly leasing the trolleys. Specifically, Complainant
alleges the following: (1) the annual notice was improper; (2) the
notice was only sent to two bus services in the area when there are many
more willing and able charter providers in the area; (3) the Respondent
improperly found Classic Caddy not to qualify as a willing and able
charter provider; (4) the Respondent has vehicles in its fleet that are
only used for charter service, specifically trolleys; (5) Respondent is
improperly leasing vehicles in its fleet when there is not a legitimate
capacity constraint; (6) Classic Caddy alleges that Dean Transportation
and Indian Trails are improperly leasing Respondent\'s vehicles without
a legitimate capacity constraint; and (7) Respondent is allowing alcohol
to be consumed on charter trips. Classic Caddy provided additional
documentation on March 27, 2002.

Respondent filed its answer on May 1, 2002. In it, Respondent stated
that it provided charter service briefly in fiscal year 2001 after
following the annual notice procedures. Respondent alleges that no
willing and able charter providers responded to the annual notice.
Respondent states that it received seven responses to its annual notice
dated August 28, 2001. It attempted to negotiate with the private
operators, and subsequently issued an Indication of Interest form for
private providers to complete if they were interested in leasing
Respondent\'s vehicles based on capacity constraints. Three private
providers returned the forms, Indian Trails, Dean Transportation, and
Tecumseh Trolley. The Respondent states it ceased to provide charter
service because it could not reach agreement with the private willing
and able charter operators. Respondent alleges that requests for charter
are referred to private operators. The Respondent states that the
charter regulations relate to intercity charter service and that it does
not provide any intercity charter service.

On June 13, 2002, Classic Caddy filed its reply to Respondent\'s answer.
In its reply, Classic Caddy reiterated its allegations and added that
the Respondent provided charter service for the International Art
Festival in East Lansing, MI.

On April 1, 2002, Tecumseh Trolley filed a complaint alleging the same
violations as Classic Caddy. Additionally, on July 9, 2002, it provided
documentation supporting its allegations.

On June 20, 2002, Indian Trails submitted a letter to the American Bus
Association complaining about the Respondent providing unauthorized
charter service. FTA was also provided with a copy of the information.
Indian Trails included with its materials copies of the Respondent\'s
charter terms.

On July 16, 2002, FTA consolidated the three complaints and asked that
the Respondent answer a number of questions related to its trolleys. On
August 16, 2002, Respondent replied to the three

consolidated complaints, as well as responded to FTA\'s additional
questions. Respondent stated that it has two trolleys, which were state
funded. Respondent states that the trolleys are in its active fleet;
however, the trolleys are not currently being used for a scheduled
route[^2], but rather for special occasions. The trolleys are also being
leased for charter service. Respondent states that it is not providing
any direct charter service and that it is leasing the trolleys to
private providers based on capacity constraints. Respondent states that
the service provided for the International Art Festival was not charter
service, but scheduled service.

Respondent states that as of August 8, 2002, it ceased accepting any
bookings of its trolleys for private operators. It alleges this was done
in an attempt to resolve the outstanding complaints. Respondent
requested a thirty (30) day conciliation period, which was granted on
August 15, 2002. The conciliation period ran on September 14, 2002, but
the parties did not reach a settlement.

[Discussion]{.underline}

As Complainants have accurately stated, recipients of Federal financial
assistance cannot provide charter service using Federally funded
equipment or facilities, unless one of the limited exceptions applies.
In the absence of one of the limited exceptions, the recipients are
prohibited from providing the service 49 C.F.R. Section 604.9(a).
Respondent is asserting that it is not providing direct charter service
and that it is leasing its trolleys pursuant to the exception under 49
C.F.R. Section 604.9(b)(2).

[A. Regulations]{.underline}

Under 49 C.F.R. Section 604.9(a), if a recipient desires to provide
charter service, it must first determine whether there are any willing
and able private charter providers. If there is at least one willing and
able provider, the recipient is prohibited from providing charter
service unless one of the exceptions applies. *Id*. The recipient must
follow all the procedures for determining willing and able private
operators under 49 C.F.R. § 604.11. The public participation process
requires at a minimum that a notice be placed in a newspaper of general
circulation and a notice is required to be sent to all private charter
service operators in the proposed geographic charter service area. 49
C.F.R. § 604.11(b)(1) and (2). The notice needs to include among other
items, the categories of revenue vehicle. *Id*. at (c)(2). There are
only two categories of revenue vehicle, buses and vans. 49 C.F.R. §
604.5(d).

[B. Prior Triennial Finding]{.underline}

On October 3, 2000, the Respondent had a deficient finding with regard
to charter bus. At that time, FTA stated that the Respondent was
providing trolleys to private charter operators under Exception 2, when
it should be utilizing Exception 7. The FTA required the Respondent to
publish its annual notice to determine whether there were any willing
and able private charter operators.

[C. Annual Notice]{.underline}

On September 5, 2000, and August 31, 2001, the Recipient published
annual notices in the *Lansing State Journal.* The notices proposed that
the Respondent intended to provide charter service using Chance Trolley
vehicles. The notice was misleading, since it did not properly state
what type of revenue service the Respondent intended to provide, namely
bus or van service. The notice implied that if a private provider could
not provide trolley service it could not qualify as a willing and able
charter provider. Additionally, the Respondent was required to provide
notices to all private charter operators in the area. Respondent in its
answer dated May 1, 2002, states only that it published the notice. It
does not indicate that notices were sent directly to all private charter
operators in the geographic area as required under 49 C.F.R. § 604.11
(b)(2).

[D. Leasing Trolleys]{.underline}

The Respondent has been leasing the trolleys to private operators
pursuant to its Indication of Interest forms. Although the form states
that the Respondent\'s equipment will only be used \"when the charter
operator, lacks capacity to provide charters or is unable to provide
equipment accessible to elderly and handicapped persons for charters,\"
private operators have been using the trolleys when there is not a
capacity constraint. Capacity should relate to the private operator\'s
overall vehicle capacity. The private operator does not have a capacity
constraint, simply because it does not have a trolley. It would only
have a capacity constraint if it did not have enough buses or vans to
handle its private charter business. This misinterpretation was cited in
FTA\'s triennial findings dated October 3, 2000, when the Respondent was
informed that it should not be leasing trolleys under Exception 2 of the
regulations, but rather Exception 7. Tecumseh Trolley has admitted that
it filled out the Indication of Interest form when it did not lack
capacity, regarding buses and vans.

Although Respondent indicated in a letter dated August 9, 2002, that as
of August 8, 2002, it \"ceased accepting bookings for use of its
equipment by charter operators, including the trolleys which had been
used for weddings,\" it still is working out commitments for bookings
made prior to August 8, 2002. It appears that even now, CATA is still
improperly leasing its vehicles for charters. The trolleys are not being
used for regular service and are only being used for charter service
either directly by the Respondent or improperly leased to private
operators for charter service. Finally, the regulations state that
\"\[a\]ny charter service that a recipient provides under any of the
exceptions in this part must be incidental charter service. \"49 C.F.R.
§ 604.9(e). Incidental service is defined as \"charter service which
does not: (1) interfere or detract from the provision of the mass
transportation service for which the equipment or facilities were funded
under the Act; or (2) does not shorten the mass transportation life of
the equipment or facility.\" 49 C.F.R. § 604.5(f). The trolleys were
solely being used for charter service and were not being used for mass
transportation at all.

[E. International Art Fair]{.underline}

The regulations define charter service as the following:

transportation using buses or vans, funded under the Acts of a group of
persons who

> pursuant to a common purpose, under a single contract, for a fixed
> charge for the vehicle or service, who have acquired the exclusive use
> of the vehicle or service in order to travel together under an
> itinerary either specified in advance or modified after leaving the
> place of origin. Includes incidental use of FTA funded equipment for
> the exclusive transportation of school students, personnel, and
> equipment. 49 C.F.R. § 605.5(e).

Thus, a determination needs to be made as to whether Respondent\'s
service meets the definition of charter by examining the elements
required for charter service. In order to qualify as charter service,
the following questions need to be answered:

a\) Is this transportation service using buses funded with FTA money?

b\) Is the service for a common purpose?

c\) Is it under a single contract?

d\) Is it for a fixed charge for the vehicle or service?

e\) Is the exclusive use of the vehicles to travel together under an
itinerary either specified in advance or modified after leaving the
place of origin?

The International Art Fair (the \"Fair\") service utilized buses that
were funded with Federal funds. There was a common purpose, specifically
for the Fair. It was a one-day event, not regularly scheduled service.
Although the service provided was free. FTA guidance states that the
cost of the service was irrelevant.[^3] The exclusive use of the
vehicles was to transport individuals to the Fair, although the service
was open to the public, it was not mass transportation. It was only for
those individuals interested in attending the Fair. This service did not
involve additional buses on a regularly scheduled route, which would
have not been charter service, but rather involved service that was
added without following the required procedures for providing a new
route. This service does not fall under any of the recognized
exceptions; therefore, it is illegal charter service.

[F. Willing and Able Status of Classic Caddy]{.underline}

The Respondent determined that Classic Caddy was not a willing and able
charter provider. In the Charter Questions and Answers from 52 FR 42248
(November 3, 1987), the Answer to No. 12 stated that \"\[i\]f a private
operator submits documentary evidence that it has the desire to provide
service and the ability to supply vehicles, as well as the necessary
legal authority, it must automatically be determined \'willing and
able.\'\" The Respondent can only conduct a further investigation of a
private operator\'s status if there is reasonable cause to believe that
the information has been falsified. The Respondent should have
determined that Classic Caddy was \"willing and able.\"

[G. Alcohol Use on Charter Trips]{.underline}

Complainants have alleged that alcohol is present during Respondent\'s
charter trips. FTA does not regulate the use of alcohol on charter
trips.

[H. State Funding]{.underline}

CATA states that the trolleys are state funded. If the vehicles were
procured without Federal funds, they could be used for charter service
if they were kept completely separate from any Federally funded facility
or activity. The trolleys could not be stored in a Federally funded
facility.[^4] The trolleys would need to be kept completely separate
from all Federally funded activities, including maintenance. CATA has
not demonstrated that the trolleys are kept separate from the rest of
its Federally funded fleet.

[I. Intracity Service]{.underline}

CATA has stated that it is providing intracity service as a reason why
the service they are providing is allowable. Although 49 U.S.C. Section
5323(d) only discusses that recipients of federal assistance cannot
provide intercity charter service, it references the agreement that
recipients must enter into with the Department of Transportation as a
condition of receiving the assistance. Pursuant to FTA\'s Master
Agreement MA(9), October 1, 2002, Section 28, a recipient cannot provide
charter service unless the service is under one of the exceptions in
FTA\'s regulations, 49 C.F.R. Part 604. FTA\'s charter regulations, 49
C.F.R. Part 604, prohibit any type of charter service. Intracity service
is riot one of the listed charter exceptions under FTA\'s regulations,
49 C.F.R. §. 604.9(b). Therefore, CATA cannot provide the service as it
currently does.

[Conclusion]{.underline}

Based on all the information provided, FTA finds that the Respondent has
been providing illegal charter with its trolleys, both direct and
indirect service through improperly leasing the vehicles. The Respondent
has also conducted illegal charter using its buses for functions such as
the International Art Fair. The Respondent improperly determined that
Classic Caddy was not a \"willing and able\" charter provider. If the
Respondent wishes to use its trolleys for charter service, they must be
segregated from all Federally funded assets.

[Remedy]{.underline}

Complainants have requested that Respondent immediately cease the
charter operations at issue. FTA grants Complainants\' request for the
cease and desist order and orders Respondent to cease providing charter
service using its trolleys and any other vehicles and cease and desist
improperly leasing its vehicles. If Respondent desires to provide
charter service, they must follow the notice and review procedures for
determining if there are any willing and able private charter operators
pursuant to 49 C.F.R. Part 604. Another alternative, if the trolleys are
state funded would be to separate the trolley service from all CATA\'s
other operations, and then FTA\'s charter requirements would not apply.

[Order]{.underline}

FTA finds that Respondent has been providing impermissible charter
service and orders it to cease and desist any such further service.
Refusal to cease and desist in the provision of this service could lead
to additional penalties on the part of FTA. Additionally, the mileage
for improper charter use should not accrue towards the useful life of
the Federally funded vehicles.

In accordance with 49 C.F.R. § 604.19, the losing party may appeal this
decision within ten days of receipt of the decision. The appeal should
be sent to Jennifer Dorn, Administrator, FTA, 400 Seventh Street, S.W.,
Room 9328, Washington, D.C. 20590.

Joel P. Ettinger

Regional Administrator

October 11, 2002

[^1]: Respondent receives Section 5307 and 5309 funds from FTA;
    therefore, they must comply with the charter regulations.

[^2]: Respondent sent a clarifying letter dated September 23, 2002.

[^3]: In an answer to the cost issue in the Charter Questions and
    Answers from 52 FR 42248 (November 3, 1987), Question No. 27(a),
    UMTA (the Urban Mass Transportation Administration a precursor to
    FTA) stated the following: \"

    \"Cost is irrelevant in determining whether service is mass
    transportation or charter service. Thus, service which meets the
    criteria set by UMTA, i.e., service controlled by the user, not
    designed to benefit the public at large, and which is provided under
    a single contract, will be charter regardless of the fact that it is
    provided for free.

    As a general rule, free charter service would be \"non-incidental\"
    since it does not recover its fully allocated cost, and could not be
    performed by an UMTA recipient, even under one of the exceptions to
    the charter regulations. However, UMTA will consider certain types
    of free charter service to be \"incidental.\" An example of this
    would be free service to an economically disadvantaged group when
    there is no private operator willing and able to perform the
    service. Since UMTA is concerned about the diversion of mass transit
    revenues and the reduction in mass transportation life resulting
    from service provided below cost, it will, when presented with a
    complaint, consider such service \"incidental\" charter only in a
    very limited number of cases.\"

[^4]: In an answer to Question No. 26, relating to the use of locally
    funded buses for charter in the Charter Questions and Answers from
    52 FR 42248 (November 3, 1987), UMTA stated in order to use the
    vehicles they need to be kept completely separate from Federally
    funded assets, including maintenance activities.