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[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]

          FEDERAL GOVERNMENT COMPETITION WITH SMALL BUSINESSES

=======================================================================

                                HEARING

                               Before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                     WASHINGTON, DC, JULY 18, 2001

                               __________

                           Serial No. 107-19

                               __________

         Printed for the use of the Committee on Small Business

                    U.S. GOVERNMENT PRINTING OFFICE
74-727                      WASHINGTON : 2001

For Sale by the Superintendent of Documents, U.S. Government Printing Office
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                      COMMITTEE ON SMALL BUSINESS

                  DONALD MANZULLO, Illinois, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
ROSCOE G. BARTLETT, Maryland             California
FRANK A. LoBIONDO, New Jersey        DANNY K. DAVIS, Illinois
SUE W. KELLY, New York               WILLIAM PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio               DONNA M. CHRISTIAN-CHRISTENSEN, 
PATRICK J. TOOMEY, Pennsylvania          Virgin Islands
JIM DeMINT, South Carolina           ROBERT A. BRADY, Pennsylvania
JOHN THUNE, South Dakota             TOM UDALL, New Mexico
MIKE PENCE, Indiana                  STEPHANIE TUBBS JONES, Ohio
MIKE FERGUSON, New Jersey            CHARLES A. GONZALEZ, Texas
DARRELL E. ISSA, California          DAVID D. PHELPS, Illinois
SAM GRAVES, Missouri                 GRACE F. NAPOLITANO, California
EDWARD L. SCHROCK, Virginia          BRIAN BAIRD, Washington
FELIX J. GRUCCI, Jr., New York       MARK UDALL, Colorado
TODD W. AKIN, Missouri               JAMES R. LANGEVIN, Rhode Island
SHELLEY MOORE CAPITO, West Virginia  MIKE ROSS, Arkansas
BILL SHUSTER, Pennsylvania           BRAD CARSON, Oklahoma
                                     ANIBAL ACEVEDO-VILA, Puerto Rico
                      Doug Thomas, Staff Director
                  Phil Eskeland, Deputy Staff Director
                  Michael Day, Minority Staff Director

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 18, 2001....................................     1

                               Witnesses

Eakes, John, Owner & President, Royal Laundry Systems............     3
Hamerschlag, Arthur, Deputy CFO, Veterans Health Administration..     4
Spates, Michael, Manager of Delivery Options, U.S. Postal Service     5
Tucci, Gregory, Past Owner, P.A.S.S. of Granville................     7
Merritt, Rick, Executive Director, PostalWatch...................     9
Reisland, Scott, Owner & Manager, Denali Grizzly Bear Cabins/
  Campground.....................................................    30
Mack, Tom, Owner & President, Tourmobile, Inc....................    31
Mastromarco, Dan, Travel Council for Fair Competition............    34
Hart, Clyde, Vice-President, American Bus Association............    36

                                Appendix

Opening statements:
    Manzullo, Hon. Donald........................................    43
    Velazquez, Hon. Nydia........................................    44
Prepared statements:
    Eakes, John..................................................    46
    Hamerschlag, Arthur..........................................    53
    Spates, Michael..............................................    56
    Tucci, Gregory...............................................    68
    Merritt, Rick................................................    72
    Reisland, Scott..............................................   144
    Mack, Tom....................................................   148
    Mastromarco, Dan.............................................   165
    Hart, Clyde..................................................   177
Additional Information:
    Statement of Mr. C. Jack Pearce, President, O.S.I. 
      Management, Inc............................................   184
    Letter to Matthew Szymanski, Special Counsel, from Michael 
      Jimenez, Strategic Impact, Inc.............................   196
    Letter to Congressman Manzullo from Greg Felt, Canyon Marine, 
      Inc........................................................   200
    Letter to Mr. Spates from SBA................................   217
    Letter to Mr. Spates from Chairman Manzullo..................   221
    Letter to Chairman Manzullo from PostalWatch.................   225
    Letter to Chairman Manzullo from USPS........................   236

 
           FEDERAL GOVERNMENT COMPETITION WITH SMALL BUSINESS

                              ----------                              

                        WEDNESDAY, JULY 18, 2001

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:15 a.m. in room 
2360, Rayburn House Office Building, Hon. Donald A. Manzullo 
(chairman of the Committee) presiding.
    Chairman Manzullo. The full Committee on Small Business 
will come to order.
    Today, the Committee will examine the extent, impact and 
fairness of direct competition by the government with small 
businesses. We will hear testimony on a VA hospital in Illinois 
competing with a private laundry owner; the Postal Service 
competing with private mailbox services, including a couple 
from Granville, New York, driving them out of business; the 
National Park Service competing with private recreational 
services, including an Alaskan campground owner and local 
Tourmobile owner; and the Federal Transit Authority competing 
with charter bus services.
    We also have written testimony on the Air Force and Army 
providing river rafting services in Colorado--the Air Force 
providing river rafting services; I did read that right--in 
competition with private outfitters there. That witness could 
not be here today, but his statement is on the table, along 
with other witness statements provided to the Committee.
    The relevant federal agencies have also been invited to 
participate. Two of these agencies will present witnesses 
today, while the others have chosen only to present material 
for the record. Evidently they do not have enough bureaucrats 
to send one here to testify on their behalf.
    These examples represent a larger pattern, a pattern that 
costs small businesses contracts, revenues and jobs. Such 
competition by the government seems unfair by definition since 
the government shares little or none of the regulatory and tax 
burdens that it imposes on these small businesses.
    I look forward to the testimony of the witnesses before us. 
On behalf of the Committee, I thank you all for coming, 
especially those who traveled from quite a distance.
    I now yield for an opening statement by the gentlelady from 
New York, Congresswoman Velazquez.
    [Chairman Manzullo's statement may be found in appendix.]
    Ms. Velazquez. Thank you, Mr. Chairman. I am happy that the 
Committee is examining this issue today because I believe these 
problems are a core mission of advocating small business. This 
Committee has addressed the burden of government regulation and 
paperwork, which drain time and money from small business and 
discourages them from competing for federal contracts.
    In the past year, we have focused a great deal of attention 
on the practice of bundling, which is the systematic exclusion 
of small business from skilled federal contracts when they are 
bought out and handled by prime contractors. We have proven 
time and time again that this practice does more than just 
discriminate and exclude. Bundling is costly, wasteful, 
inefficient and more likely to procure lower quality goods and 
services for the federal government.
    In addition, this Committee and others have held a series 
of hearings in past years on the Federal Prison Industries' 
anti-competitive practices for government contracts. Last 
month, we took a fresh look. We learned that UNICOR paid a 
fraction of the federal minimum wage, remained exempt from OSHA 
requirements and can dictate pricing. No company in this 
country could possibly get away with that. All of these 
practices hurt American entrepreneurs' right to compete and win 
lucrative federal contracts.
    Today we focus on an even more pernicious phenomenon: the 
federal government's direct competition with small business for 
goods and services. This is exactly opposite the ideal of the 
market economy. No company should fear direct competition from 
the government, which is more entrenched, subsidized, protected 
and powerful than they could ever be.
    These are difficult activities to ferret out because they 
have been restricted for a generation first by the Office of 
Management and Budget's Circular 876 and later by the 1998 FAIR 
Act. Under scrutiny, anti-competitive government activities 
have become more subtle. That is why we are here: to look a 
little deeper.
    We will hear the concerns of several small businesses here, 
in particular both charter contracts, one by federally backed 
public transit authority, as well as the practice of the post 
office which imposed requirements on independent mailbox owners 
that drove away customers.
    Our aim here is simple; to continue to remove barriers and 
obstacles the federal government has placed in the way of 
America's small businesses. Our entrepreneurs have reason to 
expect the government will not compete with them directly, just 
as they expect the government to allow them to compete fairly 
for federal contracts.
    Thank you, Mr. Chairman.
    Chairman Manzullo. Thank you very much, Congresswoman 
Velazquez.
    Our first witness is John Eakes.
    Mr. Eakes. Yes, sir.
    Chairman Manzullo. John is a constituent of mine, the owner 
and president of Royal Laundry Systems in Marengo, Illinois. It 
is interesting that none of the small business people in 
Marengo, which is a very small town in the Midwest, had 
proffered written testimony in our last hearing dealing with 
competition from Federal Prison Industries.
    John, we look forward to your testimony. The rules are you 
will see a little light in front of you. When it gets to four 
minutes the yellow light goes on, and then when the red light 
goes on you should conclude by that time or very shortly 
thereafter.
    We look forward to your testimony. The testimony of all the 
witnesses and all the Members of Congress will be incorporated 
into the full record without objection.
    Thank you.

STATEMENT OF JOHN EAKES, OWNER/PRESIDENT, ROYAL LAUNDRY SYSTEMS

    Mr. Eakes. Mr. Manzullo, thank you very much. I appreciate 
the opportunity----
    Chairman Manzullo. John, could you put the desk mike closer 
to you, please? Thank you.
    Mr. Eakes. Thank you very much. I appreciate the 
opportunity to be here.
    My name is John. My last name is Eakes. I am the president 
and owner of a company called Royal Laundry Systems of 
Wisconsin, Inc. Years ago I had laundry plants in Wisconsin, 
Janesville and Racine and on and on. That is why it is a 
Wisconsin corporation.
    I am here because I am very concerned about competing with 
the United States Government, especially the V.A. hospital 
system and especially the V.A. hospital located in Hines, 
Illinois. I also compete with the prison system, and I have 
lost business to the prison system. I have already lost 
business to the V.A. hospital system.
    Now, I pay a considerable amount of taxes. In fact, I would 
rather have the tax and let the IRS have the government or the 
profit, but it does not sound fair to me to compete with a 
government entity with my tax dollars. It appears that I am 
paying taxes to put me out of business.
    Now, I have lost several competitive bids to the V.A. 
hospital. They are bidding out of their minds. Number one, they 
do not know how to bid. They do not know how to price it, and 
it is not a level playing field. I do not mind competition. I 
have been fighting competition all my life. But, I like a level 
playing field, and the U.S. Government, the V.A. hospital 
system, is not a level playing field.
    They bid on an account, which is a state account. It is a 
rehab center, and they bid a price of 23 cents a pound. Now, 
attached to my attachment here in the back of the room you will 
see a Laundry News article that was put out by the V.A. 
hospital system that their cost is over 35 cents a pound, so 
how can they bid 23 cents? When you do a half a million pounds 
of linen times 11 or 12 cents, they are losing a lot of money.
    What really concerns me is they are calling on one of my 
largest medical centers in the Chicagoland area. If they get 
that one, I will lay off about 40 people. These are God's poor 
people. They make $7 or $8 an hour. They pay taxes along with 
everybody else. That is the kind of jobs we are going to lose.
    My laundry plant is located in Harvard, Illinois. That is 
McHenry County. I also have a laundry plant in Rockford, 
Illinois, which is Boone County. I still have one down near St. 
Louis, Missouri.
    I already mentioned that I pay a lot of taxes. You name it, 
I pay it. Now if I happen to make a dollar, if I get real lucky 
and make a dollar, the IRS wants 39 cents out of that dollar, 
and then the State of Illinois wants another three cents, so 
they get 41 cents.
    I have never received any federal grants or any contracts 
of any kind.
    Thank you very much.
    [Mr. Eakes's statement may be found in appendix.]
    Chairman Manzullo. That is right to the point, John. We 
appreciate that very much.
    The next witness is Arthur Hamerschlag. Is that correct?
    Mr. Hamerschlag. That is correct.
    Chairman Manzullo. Thank you. He is the deputy CFO----
    Mr. Hamerschlag. Correct.
    Chairman Manzullo [continuing]. At the Veterans Health 
Administration here in Washington. I look forward to your 
testimony, Mr. Hamerschlag.

 STATEMENT OF ARTHUR HAMERSCHLAG, DEPUTY CFO, VETERANS HEALTH 
                         ADMINISTRATION

    Mr. Hamerschlag. Thank you very much, Mr. Chairman. I have 
a brief statement, but with your permission I will read an even 
briefer summary.
    I appreciate the opportunity to be here, Mr. Chairman. I 
think the record of the Department of Veterans Affairs in 
support of small business is a good one, and under the 
leadership of Secretary Principi we are taking steps to further 
improve that record.
    The V.A. has authority to purchase health care resources 
needed for the veterans' health care from community providers 
and in limited circumstances to sell resources to other 
community entities.
    Let me first say that V.A. has one primary mission, and 
that is to serve the needs of veterans and to do so in a cost 
effective and efficient manner. It is not in V.A.'s interest to 
enter into a contract that would have a negative impact on any 
community provider of that service.
    V.A. has taken several steps to ensure that the agency acts 
responsibly with the contracting authorities it does have, and 
basically we ensure that any resource to be sold is consistent 
with statute, policy and common sense. As a matter of policy, 
Mr. Chairman, V.A. is not interested in competing with any 
other provider of a community health care resource or causing 
any harm to any commercial provider of a health care resource.
    Our policy and our practice is simple. If V.A. becomes 
aware of an adverse impact to a commercial interest, we will 
not provide those services. That was done when our laundry at 
Hines considered contracting with Lorel University and will be 
done for any proposal about which we receive notice of a 
complaint. That is and will continue to be our practice. I 
think this example proves that our policy is in place and in 
fact does work.
    Mr. Chairman, you should also be aware that at this time 
the Hines V.A. Medical Center does not rely on laundry services 
of any other non-V.A. entity and does not propose to do so.
    Mr. Chairman, I would like to say again I appreciate the 
opportunity to be here. I would be happy to answer any 
questions you or the Members of the Committee may have.
    [Mr. Hamerschlag's statement may be found in appendix.]
    Chairman Manzullo. We have a vote, so we are going to vote 
and come right back. Thank you.
    [Recess.]
    Chairman Manzullo. Our next witness will be Michael Spates, 
who is the Manager of Delivery Options, U.S. Postal Service, in 
Washington, D.C.
    Mr. Spates, we look forward to your testimony. Thank you 
for coming this morning.

 STATEMENT OF MICHAEL SPATES, MANAGER OF DELIVERY OPERATIONS, 
                      U.S. POSTAL SERVICE

    Mr. Spates. Good morning, Mr. Chairman and Committee 
Members. My name is Michael----
    Chairman Manzullo. Could you pull that mike closer to you? 
Thank you.
    Mr. Spates. My name is Michael Spates. I am the Manager of 
Delivery Operations--I know it says options, but it does still 
fit the description--for the U.S. Postal Service. I ask that my 
full written testimony be submitted for the record. I will now 
give you a brief overview of that testimony.
    I am happy to be here today in response to your request to 
address the issue of competition by the Postal Service with 
small businesses. The request cited in particular competition 
with a family owned commercial mailing receiving agency or 
CMRA, as we call it. You are seeking to determine the extent, 
impact and fairness of this competition, and I will address 
these issues.
    The Postal Service recognizes that small businesses help 
drive our nation's economy. We are an important enabler of 
small business, a vital communications and distribution link. 
The Postal Service has a long, ingrained tradition of promoting 
businesses, especially small businesses, offering services and 
meeting their special needs. In fact, the Postal Service 
website, usps.com, has a link entitled Tools to Help Small 
Businesses. It is very educational and helpful.
    In addition, the Postal Service has a long history of being 
a leader in contracting with small and minority owned 
businesses, a partnership that benefits us both. Small 
businesses are critical to the ongoing success of the Postal 
Service, and we are continuously looking for ways to strengthen 
our relationship, not ways to diminish it.
    At the same time, the Postal Service has to maintain a 
delicate balance between meeting the needs of the business 
customer and the consumer protection needs of the mailing 
community. The commercial mail receiving agency rules improve 
the security of the mail by strengthening the requirements 
involved in the application and for use of a private mailbox. 
The end result benefits both businesses and consumers by 
reducing opportunities to use a private mailbox for fraudulent 
purposes.
    Provisions associated with private mailboxes, it is 
important to note, mirror the same provisions and regulations 
on post office boxes. Any perception that the Postal Service is 
seeking to compete unfairly with CMRAs may arise from 
allegations that recent rule changes were designed to make it 
difficult for CMRAs to operate and thus create a competitive 
advantage for the Postal Service. The rules in question were 
intended to fulfill the U.S. Postal Service's consumer 
protection responsibilities.
    Small business interests participated in the development of 
these new rules and standards. They were represented by the 
CMRA industry, the Small Business Administration, the National 
Federation of Independent Businesses and the National 
Association of Self-Employed.
    The evolution of CMRA rules, which include mutually agreed 
upon modifications and compromises, is a result of ongoing 
meetings with these various interest groups and the positive 
support of the CMRA industry and their representatives.
    During the discussion stages of developing the final rule, 
there was opposition from small business representatives who 
wanted to continue using the designator suite for a business, 
implying that it was an office space when actually it was a 
mailbox.
    Critics of the small business proposal, primarily the law 
enforcement representatives, strongly felt the use of suite 
could be deceptive to consumers. Also, a representative of 
Attorney Generals from 28 states supported the original 
proposal of the Postal Service to use PMB, which means private 
mailbox, just like PB or POB means post office box. It 
designates a box.
    In response to the revised proposal, 50 state Attorney 
Generals plus the District of Columbia and the Virgin Islands 
signed a letter opposing the allowance of an alternative to the 
pound sign as a designator instead of PMB. Some states are 
considering legislation at the state level to tighten these 
requirements more.
    As I stated previously, the Postal Service is attempting to 
maintain a delicate balance. There is a significant input from 
the regulatory agencies such as the Department of Justice, the 
Federal Trade Commission, state and local law enforcement. The 
initiative was not an effort of the Postal Service to compete 
with CMRAs.
    It is important to note what the CMRA industry themselves 
are saying about fraud. I would like to reference the guidance 
that is put out by a CMRA association known as the Associated 
Mail and Parcel Centers. They represent 2,700 CMRAs. It was put 
out in 2001, and it was written by its president and executive 
director, Charmaine Finney, who is also the chair of the 
Coalition Against Unfair U.S. Postal Service Competition. Ms. 
Finney was a positive participant in our meetings.
    I would like to quote their training manual. ``It is 
important to note that CMRAs have historically been recognized 
as safe harbor for criminal elements. The history of crooks and 
rip off artists utilizing the CMRA is legion. The California 
consumer protection law may appear to be onerous to many 
operators, but if there had not been a high number of people 
perpetuating scams in California CMRAs, it would not have been 
passed.'' This is a quote directly from their training manual.
    In conclusion, though some critics charge that the 
enactment of CMRA rules create an appearance the Postal Service 
misused its regulatory authority to hinder competition, the 
Postal Service proudly believes it acted responsibly in 
addressing the concerns of those impacted by the regulation.
    The end result is a stronger, more effective working 
relationship among the CMRA, small businesses, law enforcement 
and the Postal Service, resulting in enhanced consumer 
protection.
    Thank you.
    [Mr. Spates' statement may be found in appendix.]
    Chairman Manzullo. Thank you very much.
    Our next witness will be Mr. Gregory Tucci, former owner of 
the P.A.S.S. of Granville, New York. Mr. Tucci, we look forward 
to your testimony.
    Could you move the microphone closer to you? You might want 
to lift it up a little bit there. Thank you.

 STATEMENT OF GREGORY TUCCI, PAST OWNER, P.A.S.S. OF GRANVILLE 
                           (DEFUNCT)

    Mr. Tucci. Chairman Manzullo and distinguished Members of 
the Committee, thank you for this opportunity to address the 
Committee today and share with you my experience as a small 
business owner who made the fatal mistake of opening a business 
in competition with the United State Postal Service.
    My name is Gregory Tucci, and in June of 1997 I opened a 
mail and parcel center in the small town of Granville in 
upstate New York. My business, named P.A.S.S. of Granville, was 
the type of business the Postal Service refers to as a 
commercial mail receiving agency or CMRA, but we offered more 
services than this implied.
    One week prior to opening the store, I went and visited 
Roger Curtis, Postmaster of the Granville Post Office, to 
discuss my new venture, and he informed me that all we needed 
to do to receive mail for our customers was to file a list of 
our customer names and box numbers with him once a year. He 
made no mention of Form 1583. Hence, they had none on file when 
the new regulations took effect.
    Like many businesses, we got off to a slow start, but many 
prospective customers were interested in the services we 
offered over and above what they could get at the post office. 
Unlike the post office, our facility was fully handicapped 
accessible and provided customers with 24 hour secure access. 
Several prospects expressed interest and indicated they were 
thinking about switching to our service when their P.O. box 
rental expired.
    In late May, Postmaster Curtis personally delivered a copy 
of the new regulations governing CMRAs to us. He admitted not 
understanding the new rules and was unable to explain any of 
the confusing and ambiguous details. He also presented us with 
a single copy of a Form 1583 to be filled out and signed by 
every one of our customers.
    My wife, Elaine, the store manager, understood them 
perfectly. She concluded that we could be in for big trouble. 
She proved to be right. Every single one of our mailbox 
customers refused to execute the Form 1583 after reading the 
Privacy Act Statement on the back of the form, which stated 
that their home address and personal information could be 
released to anyone who asked for it if they were using our 
mailbox for business purposes. They felt this was a massive 
invasion of their privacy and violated their Fourth Amendment 
rights, while posing a threat to their safety and the safety of 
their loved ones.
    Those not using the box for business could see no reason to 
list the names and ages of their children. Parents are advised 
not to release this information for the safety of their 
children, and this was a major concern to them.
    This was only the beginning of our problems. During the 
next few months, at least two dozen people came to the store to 
apply for mailboxes; however, when presented with Form 1583 
changed their minds, citing the same reasons as our existing 
customers. Several of our mailbox customers just decided 
against the hassle and let their mailbox rental agreements 
expire without renewing.
    We started losing significant revenue, and our cash flow 
became so critical that when tragedy struck and Elaine's mother 
passed away in July of 1999, we could only afford to close the 
store for one day in order to attend the funeral.
    In August of 1999, we were notified by Postmaster Curtis 
that our store did not comply with the CMRA regulations. We 
filed a list of our customers, complete with addresses as 
required, but we had no completed Form 1583 to offer him. We 
had no feasible way to verify that each customer actually 
resided at the address we had on file.
    We received a certified letter from Postmaster Curtis on 
September 29 threatening to shut off our mail delivery on 
October 13 if we continued to be in non-compliance. We promptly 
notified all our customers and stopped collecting rent from 
them. Despite the threat of mail disruption, our customers 
still refused to file the 1583 form, and on October 13, 1999, 
all mail delivery was discontinued to our customers.
    After the shutting down of our mail delivery in what could 
be characterized as retribution for doing business with a 
postal competitor, the post office made our customers jump 
through hoops trying to collect their mail that was being held 
hostage.
    With the permanent loss of all mailbox income, as well as 
the sales of other products and services to our mailbox rental 
customers, our business began to hemorrhage red ink. Our 
financial backer saw only disaster ahead and promptly withdrew 
all support. P.A.S.S. of Granville closed its doors for the 
last time on November 20, 1999.
    Filing bankruptcy, combined with the loss of her mother, 
our business and our house, devastated my wife, Elaine. She was 
diagnosed with severe clinical depression and remains under a 
doctor's care today.
    The Postal Service used its regulatory powers to run us out 
of business. It is as simple as that. The Postal Service 
characterized all private mailbox customers as criminals while 
claiming the CMRA regulations were necessary to prevent mail 
fraud and identity theft. Our customers were not criminals. 
They were lawyers, teachers, people with disabilities, 
survivors of domestic abuse and small business owners: in other 
words, Americans with constitutional rights.
    What I find most disturbing about this entire ordeal is 
that the Postal Service launched a regulatory assault on an 
entire industry of small business competitors without ever 
demonstrating any need for the regulations. A recent report 
from the Postal Service's own Inspector General confirms this. 
By the time we closed our doors, these regulations had 
disrupted the entire private mailbox industry to such a degree 
that I could not even sell our mailboxes at fire sale prices.
    The Postal Service showed absolutely no regard for the 
impact that these regulations could have on CMRAs and their 
customers, requiring every small business in America who used a 
private mailbox to change their address and purchase all new 
stationery, marketing materials and business cards, potentially 
driving them out of business. In the words of Timothy McVeigh, 
our customers were ``just collateral damage.''
    The USPS showed no concern for our customers' privacy 
objections or for the expense of changing their address. They 
took no pity on victims of domestic violence who had found a 
safe haven. They did not care if we were driven into 
bankruptcy. Frankly, I am of the belief that shutting down 
small, private mailbox businesses such as mine was the sole 
purpose of the regulations in the first place.
    We ran an honest business and worked hard to build our 
reputation. It is too late to save our business, but it is not 
too late to save our fellow mailbox stores, their small 
business customers or all the other small businesses that will 
undoubtedly suffer a similar fate as the Postal Service 
continues leveraging its vast regulatory power and exemption 
from the Administrative Procedures Act to gain competitive 
advantage over an ever increasing number of small business 
markets.
    [Mr. Tucci's statement may be found in appendix.]
    Chairman Manzullo. Thank you very much.
    Our next witness is Rick Merritt, who is the executive 
director of PostalWatch out of Virginia Beach. We look forward 
to your testimony, Mr. Merritt.
    If you could take the mike? Thank you.

   STATEMENT OF RICK MERRITT, EXECUTIVE DIRECTOR, POSTALWATCH

    Mr. Merritt. Thank you, Chairman Manzullo and honorable 
Members of the Committee. Thanks for this opportunity to appear 
here before you today, and thank you for the very important 
work that you do on behalf of the small business community 
around the country.
    My name is Rick Merritt. I am the executive director of 
Postal-Watch, a grassroots organization founded to provide 
small businesses with a voice in postal matters. My statement 
was kind of short, but Mr. Spates brought up a few issues that 
I would like to address before I get started.
    Mr. Spates indicates that the Postal Service cooperated 
with the small, private mailbox industry and small business 
groups in preparing these regulations. The truth of the matter 
is that these organizations only became involved after the 
Postal Service promulgated the rules as final rules after 
receiving over 8,000 comments opposing and only ten supporting 
the rules.
    I also might add that I find it interesting that Mr. Spates 
brings up the Federal Trade Commission as the last time that we 
checked they had no position on the private mailbox issue.
    He mentions a consumer protection responsibility on the 
part of the Postal Service. Unfortunately, I do not think the 
Postal Service based on the last time that I read Title 39 has 
the authority to decide what it perceives as deceptive and that 
is in fact the domain of the Federal Trade Commission.
    Moving on with my statement, a growing number of federal 
establishments are attempting to grow their budgets outside the 
appropriations process by entering a broad range of competitive 
endeavors. Of federal competitors, the Postal Service, with $67 
billion a year in revenues, is by far the largest and most 
problematic. Its unique ability to regulate without protection 
afforded by the Administrative Procedures Act and disrupt the 
mail delivery of its competitors puts it in a class of its own.
    The CMRA regulations and rules that we have been discussing 
with the last two witnesses, although modified, are still 
problematic to the small businesses and their customers that 
operate private mailbox facilities. Despite the changes that 
have been implemented over the last two years, the rules remain 
onerous, fundamentally flawed and ultimately unsustainable.
    In executing this anti-competitive scheme, the Postal 
Service, claiming exemption from the Administrative Procedures 
Act, misused its regulatory power to the detriment of a 
commercial competitor. It is clear private mailboxes compete 
with the Postal Service for P.O. box rental business.
    In 1995, prior to the implementation of these rules, the 
Postal Service had an 8.7 percent annual growth rate in P.O. 
box revenues. By 1997, the year these rules were first 
proposed, the growth rate had fallen to 1.3 percent. In that 
same year in November, the Postal Service in their five year 
strategic plan referred to the industry as rapidly growing and 
a significant competitor.
    The fact that they are a competitor to the Postal Service 
is clear. What is unclear is why the Postal Service chose not 
to do the type of due diligence that a federal agency has a 
public policy responsibility to do when regulating a 
competitor.
    These are responsibilities that were clearly put forth by 
the U.S. Justice Department Antitrust Division in 1979 when the 
Postal Service attempted to regulate magnetic computer tapes as 
magically becoming letter mail. The Justice Department gave it 
clear guidance on what its requirements were, one of which was 
to demonstrate that there was a need.
    The Postal Service has done no studies on the criminality 
and, quite frankly, has no evidence as to any significant or 
disproportional criminality taking place at private mailbox 
facilities. It also did not conduct an impact study to 
determine what the economic and, in the case of the Tuccis, 
life altering effects these regulations would have on the small 
business people that they were regulating.
    Notwithstanding, the Postal Service has produced no factual 
evidence as to any disproportional or significant criminality 
emanating from CMRAs, and consequently they have created a 
regulatory scheme that has damaged their competitors without 
documenting a need or demonstrating that they gave any concern 
for the impact of their regulatory policies. This is just poor 
public policy and realistically cannot be tolerated.
    The Postal Service unfortunately has a long history going 
back to the Hoover Administration of anti-competitive 
practices, referring to the airmail scandals in the 1930s. We 
cannot give deference to the Postal Service saying that they 
think these rules are important and necessary and thus we 
should allow them to regulate their competitors without 
documenting the need. That I think is the single, essential 
aspect of this.
    I see I have run out of time. Unfortunately, I have a lot 
more to say, Mr. Chairman. Thank you very much.
    [Mr. Merritt's statement may be found in appendix.]
    Chairman Manzullo. Thank you for coming. I have just a 
couple questions here.
    Mr. Hamerschlag, did you say that Hines V.A. Hospital is 
not engaged in doing the commercial laundry?
    Mr. Hamerschlag. That is correct, Mr. Chairman. We checked 
twice before the hearing and double checked. At this time, they 
are not providing commercial laundry services, to our 
knowledge.
    Chairman Manzullo. Mr. Eakes, do you have anything to the 
contrary on that?
    Mr. Eakes. They do have and were processing it. If they 
stopped, Mr. Chairman, they must have stopped just recently. 
They had a state bid called John J. Madden, which is located 
near Hines. They also have a large hospital on the south side.
    I have attended the bid meetings. They received the bid, so 
if they are not processing the linen I wonder who is?
    Chairman Manzullo. Do you have any response to that, Mr. 
Hamerschlag?
    Mr. Hamerschlag. The Madden contract was terminated June 
30. As far as I know, we checked with the Hines people, and 
they say they are not considering any commercial work at this 
point in time.
    Chairman Manzullo. So they do no laundry other than just 
in-house?
    Mr. Hamerschlag. Yes. Correct. It is all through V.A. 
facilities.
    Chairman Manzullo. Okay. What about for other facilities? 
Do you know for other hospitals or other not-for-profits?
    Mr. Hamerschlag. No. They are not doing work for anyone 
other than V.A. facilities.
    Chairman Manzullo. Right there?
    Mr. Hamerschlag. They may be doing work for other V.A. 
facilities, but no non-V.A. facilities.
    Chairman Manzullo. Okay. Okay. Evidently, the notice of the 
hearing took care of your problem, John. We appreciate V.A. 
jumping on this right away as soon as you got notice from us.
    Mr. Eakes, if you have any further problems on that contact 
us or, Mr. Hamerschlag, would he have the ability to contact 
you directly on that?
    Mr. Hamerschlag. Absolutely.
    Chairman Manzullo. Okay. Thank you very much. I appreciate 
that.
    I have some questions. Mr. Spates, in your testimony you 
said that the provisions associated with private mailboxes 
mirrored the regulations associated with post office boxes. Is 
that correct?
    Mr. Spates. Yes, sir.
    Chairman Manzullo. Do people who go into the U.S. Post 
Office have to fill out a form similar to 1583?
    Mr. Spates. Yes, sir, they do.
    Chairman Manzullo. Is it the same form?
    Mr. Spates. It is called a 1093. The 1583 is similar to a 
1093.
    Chairman Manzullo. It is similar?
    Mr. Spates. The information is the same.
    Chairman Manzullo. Does it ask for the names and the ages 
of the children?
    Mr. Spates. That I would have to check.
    Chairman Manzullo. Well, you should know that. Do you have 
that form with you?
    Mr. Spates. No, sir, I do not, but I----
    Chairman Manzullo. Why do you not have that with you? I 
want it before you leave, or you are not going to leave the 
room.
    If anybody is here from the post office, I would like you 
to retrieve that form immediately and bring it to my desk.
    Is there anybody here with you?
    Mr. Spates. Yes, there is.
    Chairman Manzullo. All right. You can use our computers if 
you want. I would expect you to get up and leave right now to 
get that form. Could you instruct somebody to do that?
    Could you take them to our computer so they could dig it 
off the website? Thank you. We will come back to you on that.
    Mr. Spates. All right.
    Chairman Manzullo. Now, I noticed in your testimony that 
you did not mention anything about the IG's report from Kenneth 
C. Weaver, the Chief Postal Inspector, dated April 9, 2001. Is 
that correct?
    Mr. Spates. Are you talking about the IG's report that went 
to Mr. Weaver and to Mr. Potter?
    Chairman Manzullo. That is correct.
    Mr. Spates. Right.
    Chairman Manzullo. You mentioned nothing about that in your 
testimony.
    Mr. Spates. I will be glad to. I took an excerpt out of the 
response. I am very familiar with it. Mr. Weaver and Mr. Potter 
both responded to the IG's audit, taking exception to the fact 
that they only interviewed in their audit people who were 
opposed to regulations. They did not talk to a single one of 
the state Attorney Generals involved or other consumer 
protection interests.
    Chairman Manzullo. So you are saying that there is a 
problem with the Inspector General's Office and the post 
office?
    Mr. Spates. The conclusion, and I am speaking for myself 
right now. The conclusion----
    Chairman Manzullo. I would expect you to speak on behalf of 
the post office----
    Mr. Spates. All right.
    Chairman Manzullo [continuing]. Because you are here in 
that capacity. I appreciate your personal opinions, but you are 
here representing the government.
    Mr. Spates. I am very familiar with the IG's audit and the 
various stages of that audit. We felt it was not objective in 
the fact that it only interviewed opponents.
    Chairman Manzullo. What we can do here is I can have a 
special panel and bring in your people and then bring in the 
people from the mailboxes that feel they got the brunt of it, 
and then you could have testimony right here. We can draw the 
conclusions ourselves, present that to Congress, and perhaps 
they may want to have some kind of remedial legislation on it.
    I am just astonished that you are dismissing outright the 
report of your own IG. I mean, this is a very damaging report.
    Mr. Spates. The IG said several things in that report, and 
that is the Postal Service took extra steps. Even though they 
were not required from a regulatory standpoint to do certain 
things, the Postal Service took extra steps after they 
published the first rule to get all the reactions from the 
industry. We worked out compromises and put out subsequent 
modifications to their rule.
    Chairman Manzullo. No. This statement from the IG says, 
``Our audit revealed the Postal Service complied with internal 
rule making procedures, revising rules for commercial mail 
receiving agencies. In some cases the Postal Service went 
further and accommodated the affected parties than internal 
procedures required. However, the Postal Service did not fully 
assess the impact of revised rules on receiving agencies and 
their box holders.''
    Do you agree with that?
    Mr. Spates. What they are referring to in that last 
statement--the first statement is accurate, and that is what I 
just paraphrased a moment ago.
    What they are talking about on the impact was primarily the 
cost. Mr. Merritt did a cost study that became quoted in the 
industry press as far as how much it would cost these people to 
change stationery and other costs.
    Chairman Manzullo. Did the----
    Mr. Spates. The IG--I am sorry.
    Chairman Manzullo. Go ahead and finish your statement.
    Mr. Spates. The IG reviewed that cost analysis, and it had 
problems with it also. It said it was over exaggerated.
    What the Postal Service did to help mitigate any cost 
consequences for CMRAs is it delayed the implementation of the 
requirements. They do not go into effect as far as the 
addressing requirements until next week, so they have known 
about this for almost three years as far as the addressing 
changes.
    During their normal turnover of stationery, depending on 
whether they wanted to use the pound sign or the PMB sign, they 
were well aware it was coming.
    Chairman Manzullo. Well, there is more impact than changing 
stationery. The other side of the impact is running people out 
of business. That is what happened to Mr. Tucci.
    Did the post office comply with SBREFA on this?
    Mr. Spates. I am sorry. I did not hear the question.
    Chairman Manzullo. Did you comply with SBREFA? Do you know 
what that is?
    Mr. Spates. No. I am sorry.
    Chairman Manzullo. That is the Small Business Regulatory 
Enforcement Fairness Act. It applies to government agencies, 
but not to the post office.
    We will have an amendment to make the post office fully 
comply with all the other regulations that are required of 
other federal agencies. I am sure that Mrs. Velazquez would 
probably join me in that to make sure.
    Would the post office mind, just as a matter of a courtesy 
to the Chair, doing a cost impact analysis as if you had to 
comply with SBREFA?
    Mr. Spates. I will have to see what those requirements are.
    Chairman Manzullo. See, now the shoe is on the other foot. 
Those are rules and regulations that apply to all other 
agencies that should apply to you. That is what these gentlemen 
are talking about here.
    Mr. Spates. We will do the cost analysis to the best of our 
ability. We will meet the requirements.
    I just wanted to point out we submitted in testimony in 
October, 1999, our cost analysis, a critique of the cost 
analysis done by Mr. Merritt. In there it shows what the real 
consequences are.
    Chairman Manzullo. What about Mr. Tucci? Is he a 
consequence?
    What happened to you, Mr. Tucci? Why did your customers not 
want to fill out Form 1583?
    Mr. Tucci. Among our customers, we did have an abused 
spouse.
    Chairman Manzullo. Could you put that closer to you?
    Mr. Tucci. Among our customers, we had an abused spouse who 
did not--she used her mailbox for business purposes, too. With 
the way the regulations were, her spouse could find her by 
going into the post office and asking where her physical 
address is. It would be given to him.
    Chairman Manzullo. Just a second. Mr. Spates, if somebody 
comes to the Granville, New York, postmaster and asks, does so 
and so have a post office box here, is the postmaster at 
liberty to give the name of a post office box holder?
    Mr. Spates. The regulations used to be if somebody was 
doing business out of a post office box, a business, you could 
provide the name of the business owner, but that is not true.
    Chairman Manzullo. If they are doing business out of the 
post office box?
    Mr. Spates. Out of the post office box, yes.
    Chairman Manzullo. Okay. Go ahead.
    Mr. Spates. That is not true. That information will not be 
provided just across the counter like it was before. It has to 
come from some law enforcement agency through a request. The 
same is also true for 1583.
    Chairman Manzullo. This says in Box 12 on Form 1583, ``If 
applicant is a firm, name each member whose mail is to be 
delivered.'' Then there is a parenthesis, ``(All names listed 
must have verifiable identification. A guardian must list the 
names and ages of minors receiving mail at their delivery 
address.)''
    Does that mean that parents have to disclose the names of 
their children?
    Mr. Spates. To my understanding, yes. I am not the expert 
on the requirements.
    Chairman Manzullo. You are the expert on it. That is why 
you are here.
    Mr. Spates. I just want to clarify something, and that is 
the reason for that is there could be mail received at that 
house to Joe Smith. We do not know whether Joe Smith is a 
person perpetuating a fraud, an older person, or is it one of 
the minor children of the family?
    Chairman Manzullo. But if they have the same last name? Do 
you mean every time somebody has another kid they have to file 
an amended 1583?
    Mr. Spates. I do not think it has gone that far.
    Chairman Manzullo. But that is what this says.
    Mr. Spates. If there is a change in who is receiving mail 
there, you have to list it.
    Chairman Manzullo. Now, I am Rural Route, Egan, Illinois. 
We lost our post office. It got merged with Leaf River. It 
comes to 792 East Lightsville Road.
    We get names of all kinds of people who supposedly live at 
that household. I do not think the post office looks at the 
name of each addressee and says, does that addressee live at 
this house or receive mail at that box.
    Mr. Spates. The point is a 1583 is filled out saying I am 
giving permission for the CMRA to act as my agent. Other people 
in your house can receive mail while they are staying there. It 
does not mean that you are their agent.
    Chairman Manzullo. A parent is the natural guardian and 
agent with the ability to consent to medical care. Surely that 
would carry over with the ability to consent to receiving mail 
at the same P.O. box or residence as the child.
    Mr. Spates. I do not know if you are talking about your 
private mailbox. I am talking about----
    Chairman Manzullo. No. I do not have a private mailbox.
    Mr. Spates. I mean your personal mailbox.
    Chairman Manzullo. That is correct.
    Mr. Spates. I am sorry.
    Chairman Manzullo. That is okay.
    Mr. Spates. I am talking about the CMRA is acting as an 
agent. That means they are entitled to receive mail for those 
people who sign the 1583.
    What happens sometimes in cases of divorce is somebody will 
submit a fraudulent 1583 to get his or her spouse's mail. These 
are the people who I am authorized to receive the mail for.
    Chairman Manzullo. What I do not understand is that I, with 
my mailbox, do not have to sign any form to receive any mail. 
What about Occupant?
    Mr. Spates. Where it says----
    Chairman Manzullo. Yes. What about Rural Delivery? How 
about the political junk mail that we send out?
    Did you get your form yet? Did that form come yet? We can 
check it later.
    Mrs. Velazquez?
    Mr. Pascrell. Would the gentlelady yield?
    Ms. Velazquez. Sure.
    Mr. Pascrell. Mr. Chairman, I wanted to go back to your 
line of pursuit. I know Mr. Spates is the messenger.
    In examining this form, it is a very serious accusation 
that was made in the testimony that there was not a compelling 
need to change the regulations. I do not know exactly where I 
stand on whether there was.
    What are the statistics? I mean, it would seem to me in 
light of the questioning by the Chairman and the example of 
children that was there an intent that there might be a front 
organization and that literature may be getting to kids that we 
would have no control over? What is the real reason for doing 
this in the first place?
    Mr. Spates. The real reason is if I put Joe Smith was a 
minor child----
    Mr. Pascrell. Right.
    Mr. Spates [continuing]. And we did not know that, Joe 
Smith could have been an adult in there receiving running some 
kind of a scam. If we see Joe Smith and we know Joe Smith is a 
child, we are not going to assume there is a possibility of a 
scam.
    There are certain indicators that CMRAs have put out for 
looking for scams when mail comes into one of those----
    Mr. Pascrell. But what was the original basis of changing 
that particular regulation? Did you have a plethora of 
information which led you to conclude that there were perpetual 
frauds? I mean, did law enforcement come to you and say this is 
what we recommend; you would make our job a lot easier. Is that 
how that happened?
    Mr. Spates. How the regulations got----
    Mr. Pascrell. Or none of the above? Tell me.
    Mr. Spates. A combination of all the above. The testimony 
back in October, 1999, was the Inspection Service presenting 
cases of mail fraud, significant cases. I will give you a 
couple that made national news, and that was in the--that is 
why Florida is changing their regulations or looking to change 
their regulations.
    The case of Medicare fraud that was covered on NBC News, 
Policing of America, where post office boxes were set up to 
look like doctors' offices, and false billing statements were 
filed. That was on the news.
    The case in New York recently where the gentleman was 
stealing the identity of well-known people like the Forbes 
family members, et cetera. That was all run through a CMRA.
    Mr. Pascrell. So Mr. Tucci goes into business. He gets 
those folks who want to participate in his business in that he 
can establish for them a service, a particular service. Does he 
have to investigate each of those potential customers of his in 
order to see their background? I mean, does he have that 
purview? Does he have that authority to do that? Do you want 
him to do that?
    Mr. Spates. No.
    Mr. Pascrell. What do you want him to do?
    Mr. Spates. Just to get two forms of identification just 
like is required, one of them with a picture ID, to verify that 
the person and the address where that person lives.
    Mr. Pascrell. Mr. Chairman, I would thank the gentlelady.
    Ms. Velazquez. Mr. Eakes, how has the Department of 
Veterans Affairs responded when you have confronted them about 
harming your business?
    Mr. Eakes. Excuse me. How have they responded?
    Ms. Velazquez. Yes.
    Mr. Eakes. When you walk into the building, they all run 
and hide. They do not even talk to you, so I do not know. I 
cannot respond to that.
    Ms. Velazquez. So you never have talked to them?
    Mr. Eakes. Oh, yes. Yes.
    Ms. Velazquez. What was the reaction? What was their answer 
to you?
    Mr. Eakes. I cannot remember. There really was not any kind 
of a response to speak of. They just received the bid, and they 
went and processed the laundry.
    Now, the gentleman to the left of me here said they quit in 
June. That is only about two or three weeks ago. They had the 
business for about two or three years. They have another 
account located on the south side of Chicago that is also a 
state rehab center. I do not know if they are still down there 
or they quit, but obviously they may have quit, which is good.
    Ms. Velazquez. Okay. When you state in your testimony that 
you have lost several competitive bids to the V.A., would you 
please specify what bids you lost?
    Mr. Eakes. One of them was----
    Ms. Velazquez. Are they commercial contracts or government 
contracts or city contracts?
    Mr. Eakes. They are State of Illinois rehab centers--they 
are owned by the State of Illinois--and their bids.
    Ms. Velazquez. Mr. Hamerschlag, did the Department of 
Veterans Affairs include any federal employees who are involved 
in the laundry contracts on the list required by the activities 
inventory reform, the FAIR Act?
    Mr. Hamerschlag. I cannot answer that question. I can 
either provide it for the record or consult with staff here.
    Ms. Velazquez. Do you have staff here that can answer that 
question?
    Mr. Hamerschlag. Yes. Yes, I do
    Ms. Velazquez. Mr. Chairman?
    Chairman Manzullo. Sure.
    [Pause.]
    Mr. Hamerschlag. Yes. Our laundries are listed on the FAIR 
Act.
    Ms. Velazquez. They are?
    Mr. Hamerschlag. Yes.
    Ms. Velazquez. Were those employees considered to be 
performing an inherent government function?
    Mr. Hamerschlag. Yes, they are.
    Ms. Velazquez. Did the V.A. receive any comments about any 
of the employees listed on your FAIR Act submission?
    Mr. Hamerschlag. We will have to provide that for the 
record. I cannot give you an answer to that right now.
    Ms. Velazquez. Okay. Mr. Hamerschlag, you state in your 
testimony that the V.A. will back out of the commercial 
contract if the V.A. receives a complaint by a small business.
    Mr. Hamerschlag. That is correct.
    Ms. Velazquez. What constitutes a complaint?
    Mr. Hamerschlag. Mr. Eakes is a good example. He wrote the 
President some time ago. We responded back to him in January of 
this year. He was concerned at that time about Loyola 
University. We took direct action and made it clear to the 
folks in Hines that they would not compete for that business at 
Loyola.
    Ms. Velazquez. I have a couple of questions about the 
V.A.'s contracting practices and how they relate to small 
businesses.
    Last year, the Democrats on this Committee released an 
evaluation of 21 federal agencies on their achievements towards 
their small business goals. We will be releasing the next 
edition coming this summer.
    In looking at the V.A.'s achievements, I know that the V.A. 
set the women owned business goal and the small, disadvantaged 
business goal below the statutory goal of five percent. In 
fact, the small disadvantaged business goal is only 2.5 
percent, half the statutory goal. Would you please explain to 
me why did you set a goal below the statutory goal?
    Mr. Hamerschlag. I have no direct knowledge of that. I will 
be happy to provide that for the record if I might.
    Ms. Velazquez. Well, you should have knowledge about that. 
You knew that you were coming to this hearing and that we would 
be discussing contracting practices within the V.A. You should 
be able to answer this question.
    Mr. Chairman, I would request that he submit for the 
record----
    Chairman Manzullo. That would be fine. I do not think that 
Mr. Hamerschlag's area of expertise is the area that you are 
questioning him on. We will go into that with the appropriate 
witness.
    Ms. Velazquez. Well, he has to prepare because he knows 
that we would be--or at least the staff should know that we 
will be asking this type of question.
    Let me just ask you this simple question. You just said in 
your testimony that you care about small businesses.
    Mr. Hamerschlag. Yes, ma'am.
    Ms. Velazquez. Yes. So why do you think, and you do not 
have to be an expert on this, the field of federal procurement. 
How can you explain why the V.A., if you care so much about 
small businesses, set a goal below the statutory goal of five 
percent?
    Mr. Hamerschlag. I would like to answer that question, but 
I have to tell you that is really not in the area I have any 
direct knowledge of. I just cannot give you an answer.
    Ms. Velazquez. Well, let me just say this to you. Not only 
did you set a goal below the statutory goal, but then when you 
set those goals very low you do not achieve them either.
    You need to go back to the V.A. and talk to them and tell 
them that not only are you not complying with the statutory 
goal set by the United States Congress, but that we are going 
to be releasing a report that is going to evaluate the 
performance of the V.A. regarding federal procurement goals and 
federal procurement practices.
    Mr. Hamerschlag. You may rest assured I will carry that 
back.
    Chairman Manzullo. Would you like that in writing so you 
know exactly what she is asking for?
    Mr. Hamerschlag. If you would like to make it part of the 
record, that would be fine.
    Chairman Manzullo. Thank you very much.
    Mr. Bartlett.
    Mr. Bartlett. Thank you very much.
    We have been discussing a lot of details relative to the 
practices of specific government agencies and their competition 
with small businesses. I would just like to ask a very generic 
kind of question.
    I notice here that we are receiving testimony relative to 
the Department of Veterans Affairs, U.S. Postal Service. The 
next panel will be the National Park Service and the Federal 
Transit Authority and their competition with small business.
    Not even listed here is another government agency entity 
which I know has had a major impact on small business, and that 
is the federal prison system in their employment. I have a 
small business person in one of the counties I represent that 
was almost put out of business because the prison system 
decided just arbitrarily that they were going to make aluminum 
containers. That was their business. Garrett Container. Had the 
prison done that, they would have just put them out of 
business.
    Competition is good for everybody, and I know that many 
government agencies now are deciding to compete for services 
that they used to do themselves in-house. They have developed 
procedures for commercial pricing so that they can be sure 
cities, for instance, are now contracting with others to 
collect their trash if they can do it cheaper than the 
municipal employees can collect the trash.
    They have developed commercial pricing procedures so that 
you can make sure you are comparing apples with apples when you 
are comparing the bid that you get from your municipal, state 
or federal employees and the bids you are getting from the 
private sector.
    I do not know any small business that does not think they 
can compete with a government agency and win if it is on a 
level playing field, but I am very familiar with some of the 
problems with the post office. The post office's motif for 
their little stores looks very much like the motif for one of 
their commercial competitors. You know, this is really the 700 
pound gorilla that the little mom and pop shop is dealing with.
    I remember when the home alarm people came in to talk with 
me because they were concerned that the cable people or 
telephone people and cable people also were going to get into 
the home security alarm business. There were a bunch of these 
private sector competitors. They were not afraid of 
competition. They compete every day and stay alive.
    What they were afraid of was competing were what they 
referred to as a 700 pound gorilla. The phone company owned the 
lines coming into the house. They just felt that they had an 
unfair advantage. That was worked out to the satisfaction of 
these small business people so that now the telephone company 
can compete. They are competing on a level playing field.
    I think the fundamental issue here is how do we get to a 
point where there is a level playing field? I do not know 
anybody in small business who does not think they can do a 
better job than government can do if they are on a level 
playing field.
    Is that not what we need to do is to make sure that there 
is a level playing field here? Is that not the concern of small 
business: that it is not a level playing field?
    Mr. Merritt?
    Mr. Merritt. Yes, Congressman Bartlett. One of the problems 
with the level playing field that is so often talked about is 
that government establishments enjoy enormous human and 
economic resources that dwarf those of even established small 
businesses by multiple orders of magnitude, and realistically 
they cannot be divorced from their competitive advantages.
    I think we all would agree. At least the Members of the 
Committee here I believe would agree that a government agency 
using its federal privileges for competitive advantage is poor 
policy. The problem is they cannot divorce themselves from them 
because those advantages exist by the pure fact of them being a 
federal entity. I think that is a significant problem for small 
businesses.
    I might point out that there is a very growing trend of 
government agencies going in and competing with the private 
sector. Last week, the AP ran a story about Amtrak, which 
posted the largest loss in its history of $944 million, despite 
generating a total of 46 percent of its total revenues from 
non-passenger train operations.
    When Amtrak gets to what, say 99 percent non-train 
operations, is that when we decide that it is not really in the 
public interest any more? I might point out that when they sell 
souvenirs, somebody is not selling souvenirs.
    When the Postal Service decided to sell passport photos, 
those passport photos they sold came at the direct expense of a 
small merchant down the street. They did not create any more 
demand for international travel or passports when they went 
into that business.
    I think we have some problems with even the concept of 
allowing federal agencies to compete with private sector 
companies.
    Mr. Bartlett. If your analysis is correct, and that is that 
it is just inherently fundamentally impossible for a federal 
agency to be on a level playing field with the private sector, 
then they should not be competing.
    I need to be convinced of that, and what I would like to do 
is encourage you to submit to us some recommendations as to how 
we can get to that decision point where we decide whether or 
not a level playing field can be created. If it can be created, 
then you need to tell us how that process should be conducted. 
If it cannot be created, then federal agencies should not be 
competing with the private sector.
    I would like to believe that we can, at least in many 
circumstances, create a level playing field so that competition 
will do what it always does: make the product or service better 
and make it cheaper. Goodness knows, government bureaucracies 
could benefit by some competition, could they not?
    Mr. Merritt. If it was on a level playing field.
    Mr. Bartlett. If it is on a level playing field, yes.
    Mr. Merritt. Unfortunately, again, my basic premise.
    Mr. Bartlett. I think that is our challenge.
    Thank you, Mr. Chairman.
    Chairman Manzullo. Thank you very much.
    Our search is on for the elusive Form 1093. We have been 
advised that the Form 1583 is on the USPS internet site, but 
Form 1093 is not.
    The post office has been called, and the fax is on its way. 
Is that correct?
    Mr. Spates. She is not in the room here, so she must be out 
looking for it.
    Chairman Manzullo. All right.
    Mr. Spates. I do not know why that is not on the web also.
    Chairman Manzullo. I do not know why you did not bring it 
with you because you made the statement that the regulations 
for 1583 are the same as the USPS. I would have expected it 
with the memo.
    Mrs. Tubbs Jones?
    Mrs. Tubbs Jones. Thank you. Good morning, Mr. Chairman, 
Ranking Member, gentlemen on the panel.
    I am going to stay with the United States Postal Service 
but come from a different perspective. I come from a 
prosecutor/Judge background, having worked with law enforcement 
in the past, and the experience of having had a lot of dilemma 
with post office boxes and lack of identification for many of 
those situations.
    I am reading, Mr. Spates, the government relations 
statement. It looks like a statement from the United States 
Postal Service that you worked with the CMRA industry to 
promote some of these changes. Is that correct, Mr. Spates? Who 
from the industry did you in fact work with?
    Mr. Spates. We had representatives from Mail Boxes, Etc. We 
had representatives from the Association of Mail and Parcel 
Centers. That is the one I referred to earlier that represented 
27 of the smaller CMRAs. We had two other representatives--I do 
not have their names handy right now--that represented 
different franchises.
    Mrs. Tubbs Jones. And would you restate again what your 
purpose in promulgating these regulations was, sir?
    Mr. Spates. The purpose to begin with--first, there is one 
thing I want to add to make sure everybody understands. The 
1583 is generating a lot of discussion. The 1583 has been 
modified, but it has been in effect for CMRAs for over 30 years 
that you had to file a 1583.
    There is also now a form for CMRAs to formally apply as the 
agent. That was very informal before, but the 1583----
    Mrs. Tubbs Jones. What was the original purpose for the 
1583, Mr. Spates?
    Mr. Spates. It is to sign off that I am legally saying that 
this person can act as my agent to receive my mail in my name, 
especially if it is certified or something to that effect.
    Mrs. Tubbs Jones. Go ahead. You were saying that you met 
with the CMRA representatives, and as a result of those 
discussions what occurred?
    Mr. Spates. Let me go back. Do you mind if I go back a 
little bit in time?
    Mrs. Tubbs Jones. No. Go right ahead.
    Mr. Spates. Mr. Merritt brought it up about the initial 
rule and all the comments. The initial rule apparently did not 
get as much wide circulation among the industry members as we 
thought. We got 8,000 responses, but most of them were form 
letters.
    What we did after the first filing is the Chief Postal 
Inspector, Ken Hunter, who was the Chief Postal Inspector at 
the time, because this was all done under consumer protection 
and fraud protection, called together industry members, anybody 
who had interest in these regulations, and that includes small 
business representatives, state Attorney Generals--the group 
got rather large--to see what we could do to modify the 
regulations to reach a compromise between protection and impact 
from small businesses.
    Those meetings, there has been at least a half a dozen 
large meetings that Mr. Hunter was chairing that pulled 
together compromises on these regulations. As they reached 
compromises, new proposals went out. Issues on privacy, typing 
up the privacy restrictions on what can be released, was added 
to it, working with the Coalition Against Domestic Violence and 
representing their interests from a Protective Order 
standpoint. If they are running a business out of their home, 
they did not want any information released.
    That has all been included in these regulations, so they 
have evolved to get better over time. Are they perfect? Maybe 
not, but they are significantly improved from the initial 
regulations and what existed prior to the regulations.
    Mrs. Tubbs Jones. Thanks, Mr. Spates.
    Mr. Merritt, do you believe that the Postal Service, the 
UPS, the--let me say this correctly--CMRAs, have any obligation 
to assist law enforcement in deterring fraud through mailboxes 
or people using fraudulent addresses or making 
misrepresentations as to how they are or what they represent?
    Mr. Merritt. That is obviously a very long and 
complicated----
    Mrs. Tubbs Jones. No, it is not a long and complicated 
question. The question merely is do you believe that they have 
any obligation to assist law enforcement in dealing with that 
issue? It is very simple.
    Mr. Merritt. Oh, absolutely. I am sorry. I wanted to go 
into more detail. Absolutely. I do.
    Where I part company with the Postal Service is where the 
Postal Service in its role as a regulator takes it upon itself 
to regulate in this case a particular competitor using that 
particular reasoning without justifying it as necessary. That 
is where our problem comes from, not from----
    Mrs. Tubbs Jones. So you do not--I am assuming you own a 
CMRA. You personally do that?
    Mr. Merritt. No. I was just a customer for 12 years that 
was forced to change my address----
    Mrs. Tubbs Jones. Okay.
    Mr. Merritt [continuing]. Unfairly and supply information 
that I did not feel was necessary.
    Mrs. Tubbs Jones. So you merely come here as someone who 
you believe your privacy has been invaded, not as a 
representative of one of these CMRAs that has had to deal with 
law enforcement where there have been fraudulent addresses and 
the like?
    Mr. Merritt. Right.
    Mrs. Tubbs Jones. I am just trying to be clear on who you 
represent.
    Mr. Merritt. That is correct.
    Mrs. Tubbs Jones. I do not mean to denigrate that. I think 
it is a great idea that if you believe your privacy has been 
invaded that you should be here, but I am trying to get on the 
table as well the whole issue of how do we address the issues 
that are raised by the Postal Service and others with regard to 
fraud and people who are constantly on the internet and all 
kinds of places where particularly in my community senior 
citizens who are put in a terrible situation as a result of 
being bilked by people who represent that they are something 
that they are not, and they use the mail service to do it.
    I am out of time. I am sorry. Thank you very much. If the 
Chairman will allow me time for you to respond, I would be glad 
to have you respond.
    Chairman Manzullo. Go ahead. Please.
    Mr. Merritt. Mr. Chairman, with your permission. Fraud is a 
big problem. There is no doubt. It does negatively impact the 
most vulnerable of our society.
    The problem is that with these regulations if you want to 
look at it from a fundamental standpoint, we have a commercial 
enterprise, the United States Postal Service, which has 
tremendous regulatory authority and their own in-house law 
enforcement, fully empowered law enforcement organization, not 
reporting to the Justice Department, but to potentially 
commercially minded executives.
    The point here is that if there is a particular problem 
that needs to be addressed, then they should have done the due 
diligence that SBREFA and REGFLEX and the Administrative 
Procedures Act put in place to protect small businesses.
    The other point is that for the first time with these 
regulations the Postal Service has embarked and set a precedent 
for changing our address driven mail delivery system to a 
resident recipient driven system that requires identification, 
and the privacy consequence is another issue of much 
consternation these days.
    Chairman Manzullo. Thank you, Mr. Merritt. I know that you 
are very energetic, and we appreciate that. That is why you are 
here.
    Congresswoman Napolitano?
    Mrs. Napolitano. Thank you, Mr. Chairman. I was just 
looking at the 1583 and reading the testimony of Mr. Tucci in 
regard to his customers not willing or able to fill out the 
form is concerned.
    What type of client usually is a box rental client?
    Mr. Tucci. I can give you several examples. One of our 
customers was a lawyer. Another one--we had mention of the 
internet. It was a girl who did a lot of communicating with 
people on the internet, and she wanted a safe haven for mail so 
that they would not know where she actually lived because she 
was leery, and we have all heard the stories.
    As I said, we did have an abused spouse who wanted a safe 
place where she could get her mail without her spouse being 
able to sit outside the post office for eight hours. It would 
only take eight hours. Our post office is not even open that 
long to get mail. She could come in any time, 24 hours a day. 
She could stagger her times coming in and be safe.
    We had several small business people who preferred that the 
mail came to a box rather than to their house. It just enabled 
them to separate business from home a little bit. As a business 
owner, you do not necessarily want everybody knowing your home 
address and bothering you at home at any hour of the day. By 
having a private mail, even a P.O. box or a private mailbox, it 
just gave them a little more privacy at home.
    Mrs. Napolitano. Was there any indication or at least were 
you aware that any of your customers might have been involved 
in some kind of fraudulent type of operation?
    Mr. Tucci. None of our customers did. To be honest with 
you, we had identification from all of our customers on file. 
If the post office had a problem with a customer they could 
come to us, and we could give them all the information they 
had. Our customers trusted us with that information. They were 
not trusting the post office with that information.
    The biggest objection they had was the Privacy Act 
statement that is on the back of 1583. We heard that the post 
office will not give that out. Well, the post office has made 
it a rule to not give that out. They have not made it part of 
the regulations that that information will not be given out. 
Therefore, two years down the road they could change that rule 
without going through the whole process.
    Mrs. Napolitano. Mr. Merritt, could you answer that?
    Mr. Merritt. The Postal Service, as they interpret their 
regulatory power, is exempt from even posting notice and 
requesting comment to the rule making, so Mr. Tucci is in 
effect correct. They could change the rules at will any time 
they wanted to.
    Mrs. Napolitano. Mr. Spates?
    Mr. Spates. We would not change the rule, especially 
pertaining to privacy, without following the process. I have 
the lawyer here with me who helps us on that process. He can 
verify that. We would file a proposed notice to get comments. 
In fact, we tightened up the privacy rules, and we put out for 
comment back when we were tightening up the privacy rules.
    Mrs. Napolitano. But this form has been in effect 30 years. 
Why has it not been done?
    Mr. Spates. It has been done. If I may point out, on the 
privacy statement on the 1583 it says about two-thirds down in 
kind of small print, ``Information concerning an individual who 
has filed an appropriate Protection Order, for example, will 
not be disclosed in any of the above circumstances except 
pursuant to the Order of a Court of competent jurisdiction.'' 
This is one of the revisions.
    Mrs. Napolitano. Yes. You are talking about a Protective 
Order. I am talking about any client.
    Mr. Spates. This information will not be released.
    Mrs. Napolitano. It just does not make sense.
    Mr. Spates. It used to be released, but not now.
    Mrs. Napolitano. The last statement in the last few lines 
indicates that, ``If the form is not completed, the mail will 
be returned to sender.''
    Mr. Spates. If a 1583 is not filled out then that CMRA 
cannot legally act as the agent for that person, so we cannot 
give that mail to the CMRA.
    Mrs. Napolitano. Is that not stretching it a little bit 
far? These people have opted to have a recipient of their mail, 
and they verified name, address, drivers license or whatever it 
is that they used to be able to get up the account.
    Mr. Spates. And had not signed the 1583?
    Mrs. Napolitano. Correct.
    Mr. Spates. We do not have any evidence to show that they 
authorized----
    Mrs. Napolitano. But they do.
    Mr. Spates. The CMRA does?
    Mrs. Napolitano. I am assuming they are.
    Mr. Tucci. Yes. We had all that information on file. If the 
post office questioned whether we were able to, we could show 
it to them, but we would want to keep it on file. We only 
turned over a list of names and box numbers of our customers 
receiving mail.
    If there was any question as to whether we were in 
agreement with these people, they could come in and ask us and 
check it off their list or something, but the information our 
customers trusted us to keep private. They did not trust the 
post office to keep it private.
    Mr. Spates. But the point is the Postal Service is turning 
over mail to an independent third party that we have no 
evidence to show that they have the authority to receive the 
mail for that person.
    Mrs. Napolitano. Then the question, Mr. Spates, from me, 
would be, have you found areas or times or instances where 
there has been a problem for a recipient of a piece of mail 
that is dated that has gone through a mail service unbeknownst 
to them?
    Mr. Spates. Unbeknownst to them? Yes, ma'am. The case in 
point got a lot of publicity several years back on the 60 
Minutes show where the identity theft of----
    Chairman Manzullo. Would you yield on that?
    Mrs. Napolitano. Yes. Certainly.
    Chairman Manzullo. Do you have something more specific than 
a TV show? Do you not have real, live examples of fraud to 
which you are referring?
    Mr. Spates. We can provide them.
    Chairman Manzullo. I mean, why do you not have that now? 
That is why we are having the hearing.
    Mr. Spates. I have one case with me that just broke in the 
Washington, DC, metropolitan area. If you want me to outline 
it, I can.
    Chairman Manzullo. Your time is up, but if you want to take 
a minute now. You know, I am not interested in what 60 Minutes 
or one of those shows have on there. I mean, that is 
interesting, but I would expect that you would have a portfolio 
of abuse after abuse after abuse.
    Mr. Spates. We do have that. That was provided in the 
October of 1999 testimony. We have updated that.
    Chairman Manzullo. Can you update for us?
    Mr. Spates. Yes. Yes.
    Chairman Manzullo. Okay. I finally got this Form 1093, and 
I can assure you that when I was elected to Congress--our 
family maintains two residences--and I went to the PO in 
Alexandria, they gave me this form. Do you know what I put on 
here? I put my name and address and signed it. No one asked me 
for a picture ID. No one asked me for the name of my children.
    I mean, I have a very difficult time believing, Mr. Spates, 
that the Form 1583 is the substantial equivalent. I mean, first 
of all, it does ask Name of Person Applying and Name of 
Organization.
    Mr. Spates. I am not sure that this 1093----
    Chairman Manzullo. This came from your office.
    Mr. Spates. I am just saying I am not sure this is the 
latest one.
    Chairman Manzullo. All right. You are not going to leave 
the room until somebody makes a verification. Does anybody know 
if this is in fact the form in effect from the USPS, Form 1093 
dated July, 1998? Is this the one that is in effect? Does 
anybody know from your organization? Ask them, please.
    Mr. Spates. Jeff? Is Jeff back there? There he is.
    Chairman Manzullo. Does anybody know? How many are here 
from USPS? How many people do you have with you?
    Mr. Spates. Three.
    Chairman Manzullo. There are three people here? Who was 
called at USPS for this Form 1093?
    Mr. Zelkowitz. We have been calling the Retail people and 
Delivery. The Delivery expert is not in the office today.
    Chairman Manzullo. What is that person's name?
    Mr. Zelkowitz. Roy Gamble.
    Chairman Manzullo. Roy Hamble?
    Mr. Zelkowitz. Gamble.
    Chairman Manzullo. Campbell?
    Mr. Zelkowitz. Gamble with a G.
    Chairman Manzullo. Gamble?
    Mr. Zelkowitz. Right.
    Chairman Manzullo. And that person's official capacity?
    Mr. Spates. He works in Delivery. He has been heavily 
involved with modifications to the form from the standpoint of 
identification requirements and working with our Retail people.
    Chairman Manzullo. And he reports to you?
    Mr. Spates. Yes, he does.
    Chairman Manzullo. Why did you not bring him with you?
    Mr. Spates. He is on annual leave. He is away out of town.
    Chairman Manzullo. And there is no one else that has the 
answer on that?
    Mr. Spates. The Retail Operations folks, as Jeff mentioned.
    Mr. Zelkowitz. I have not been successful in reaching those 
people yet.
    Mr. Spates. This is a Retail Operations proposal.
    Chairman Manzullo. I would just like to say that I am not 
done with this yet. For the hearing, that is fine.
    I am going to give Ms. Velazquez a couple more minutes if 
she wants to follow up----
    Ms. Velazquez. Yes.
    Chairman Manzullo [continuing]. And then we will go to the 
next panel.
    Ms. Velazquez. Mr. Spates, the preamble in the final 
regulation on commercial mail receiving agencies dated March 
25, 1999, states that, ``A number of commentors for `the new 
rule' questioned the intent of the undertaking to amend the 
rule. There are assertions from CMRAs that compliance with the 
regulation would put them out of business. Customers of CMRAs 
assert that the rule making appears to discriminate against 
them because of their choice of an address. These claims are 
erroneous.''
    This is what appears on your report. Now that you are aware 
that the rule could indeed in fact put CMRAs out of business, 
will you amend the rule?
    Mr. Spates. Since that time, we have amended the rule to 
make some changes. The PMB designation. The CMRAs felt like 
that was a scarlet letter identifying them as a possible 
problem address. That is when Ken Hunter, working with the CMRA 
industry, came up with a compromise allowing you to use PMB or 
pound sign. A lot of them do use pound sign today.
    What you are not allowed to use, and in fact the State of 
California prohibits it for CMRAs already, is the word 
``suite.'' That was a real concern for hiding behind, saying I 
have an office space. That is what suite implies. That was some 
of the concerns.
    We made other changes, and privacy issues was one of them, 
that answered the concerns of Mr. Tucci. There have been 
significant modifications.
    We have also extended the time line of when this goes into 
effect so that they can turn over, you know, their stationery 
stock and business advertising. A lot of modifications were 
made.
    There was also a modification made where it originally said 
in the rule we will return mail that did not have those 
designations.
    Ms. Velazquez. Mr. Spates, the modifications were made 
after you put out the rule.
    Mr. Spates. Right, because that is when everybody came out 
of the woodwork, all the special interest groups, and we wanted 
to--we made a mistake, and we----
    Ms. Velazquez. But Mr. Tucci was put out of business 
because of the rule.
    Mr. Spates. 1583 was in effect when Mr. Tucci opened his 
business. That has been in effect for over 30 years. If someone 
did not want to fill out a 1583, that has been there. The 
CMRAs, there are roughly 10,000 of them today. They are still 
growing. They have had that requirement all along. I do not 
think we can blame it on 1583.
    Ms. Velazquez. Mr. Tucci, you did not know about the Form 
1583?
    Mr. Tucci. No. Before I opened the business, the week 
before that I went to our local postmaster. I asked him what I 
needed in order to receive mail from my customers.
    All I was told was that I had to report their names and the 
box numbers that they were using once a year. No mention was 
ever made of the original 1583, which I have never seen a 
original 1583.
    Ms. Velazquez. Is there a process in place, Mr. Spates, 
where you explain?
    Mr. Spates. There is a reference to explain it. I would 
like to ask Mr. Tucci a question if I can.
    Ms. Velazquez. Sure.
    Mr. Spates. Were you a franchise, part of a franchise?
    Mr. Tucci. No.
    Mr. Spates. You were just totally independent?
    Mr. Tucci. Yes.
    Mr. Spates. We have literature that is provided to 
postmasters to provide to CMRAs as far as what the----
    Ms. Velazquez. Did you get a copy of that?
    Mr. Tucci. No, I did not.
    Ms. Velazquez. What do you have to say to that, Mr. Spates?
    Mr. Spates. If he did not, it is very unfortunate. Very 
unfortunate.
    Ms. Velazquez. Well----
    Mr. Spates. You are talking about a small post office deep 
in the ranks of the Postal Service. I apologize that they made 
a customer error, but----
    Chairman Manzullo. Excuse me a second. I come from a small 
town, and I take great exception to reference even to a small 
post office as somehow being second class to a larger city post 
office----
    Mr. Spates. I was not----
    Chairman Manzullo [continuing]. Because the people that I 
deal with at our post office have answers for every question. 
In fact, at times he has even helped me fix my tractor. He 
knows the name of my dog. Some carry biscuits.
    Whenever a business person goes to a postmaster, regardless 
of the size, and says I want to comply with the law I would 
expect that postmaster to have the information and not have to 
rely upon an association. It is not the job of the association 
to instruct people in small businesses going into this. It is 
the job of the post office.
    Mr. Spates. I totally agree with you. I apologize that I 
gave the impression. To show you just what a small town, 5,000 
people roughly, postmaster did for Mr. Tucci and his customers, 
those people were concerned that they were not getting their 
mail. He separated the mail and personally carried it down to 
Mr. Tucci's organization separated for the people who had a 
1583 and gave it to Mr. Tucci.
    You are right. The postmaster does bend over backwards in 
the local communities to help them out, so while I do not know 
exactly what transpired that first day they met, but Mr. Curtis 
kept bringing him up to date on what was required, and there 
still was not any compliance.
    Ms. Velazquez. Mr. Tucci, would you like to comment on 
that?
    Mr. Tucci. Yes. First off, if there was a problem with us 
not filing a 1583 in the first place, our customers were 
receiving their mail for two years up until the new regulation 
took effect.
    As for hand delivering our mail, that was after the mail 
was cut off. In order for our customers to get their mail 
before it was sent back to the sender, they went down to the 
postmaster, filled out a 1583. Instead of Mr. Curtis handing 
them the mail then, he made them come back to our store. He 
brought the mail back down to our store and handed it to them 
there.
    Ms. Velazquez. Yes?
    Mr. Spates. From my conversation with Mr. Curtis, they 
filled out the 1583, and then he brought the mail down to them 
on several occasions. It was not just you had to come to the 
post office every day. He brought it down on several occasions.
    He also allowed them to file a change of address if they 
wanted to go somewhere else, to have their mail sent somewhere 
else. He was helping the customer out who had a 1583.
    Mr. Tucci was given plenty of advance notice, although it 
has to be approved all the way up to the district manager 
level, to correct the situation. Nothing was done, so we could 
not deliver the mail for the other people.
    Chairman Manzullo. If you would yield?
    Ms. Velazquez. Sure.
    Chairman Manzullo. Evidently nothing was done because 
people did not want to reveal the names of their children and 
their ages, and they would not fill out the form. Is that 
correct, Mr. Tucci?
    Mr. Tucci. Yes.
    Chairman Manzullo. That is why nothing was done. I would 
defy anybody to take a look at the 1093 dated July of 1998, 
while you are trying to find out if this is current, and Form 
1583. There is no language similar on here to indicate you have 
to list the names of your children. I would never fill out a 
1583 that listed any of my children. That is no one's business. 
That is not the business of the post office.
    I doubt very much, Mr. Spates, whether or not if the name 
of my children were on a form and I had a box and a document 
came addressed to them that you would think there was some kind 
of a fraud. If that is where you are spending the time to look 
for fraud, I can think of better places where it could be done 
than that.
    We want to thank the first panel for coming, and we will 
continue to work on it. Mr. Spates, I appreciate your patience 
and everybody else here.
    Mr. Hamerschlag, I appreciate the fact that the V.A. jumped 
on this as soon as Mr. Eakes got a hold of you. I appreciate 
looking forward to any other problems that may arise.
    We have a vote here. During the period of time, the staff 
could get the second panel ready.
    [Recess.]
    Chairman Manzullo. We are going to start our second panel. 
We continue this hearing on federal government competition with 
small businesses.
    Our first witness will be Scott Reisland, owner and manager 
of Denali Grizzly Bear Cabins and Campground in Denali, Alaska. 
He came all the way from Alaska to testify here today. Is that 
correct?
    Mr. Reisland. Yes, sir.
    Chairman Manzullo. And along with your son? Is he here?
    Mr. Reisland. My son and I are very excited to be here.
    Chairman Manzullo. We are honored that you came here and at 
your own cost.
    Mr. Reisland. Yes, sir.
    Chairman Manzullo. We have a five minute rule, but we are a 
little bit flexible. We appreciate your testimony. Why do you 
not go ahead and start, Mr. Reisland?

STATEMENT OF SCOTT REISLAND, OWNER/MANAGER, DENALI GRIZZLY BEAR 
                       CABINS/CAMPGROUND

    Mr. Reisland. Thank you. My name is Scott Reisland. I am 
from Denali, Alaska. My parents moved to that area in Alaska 
during the territory days and developed a small cabin and 
campground business, which our family of five run to this day.
    I am here also representing eight neighboring campgrounds 
in the Denali area, along with the National Association of RV 
Parks and Campgrounds, ARVC, which is our trade association. We 
have concerns with National Park Service infringement on 
private enterprise nationwide.
    The campgrounds around Denali and gift shop people and 
businesses in the tourist industry are very gravely concerned 
and are being threatened by specifically Denali National Park 
and Preserve. The Park Service developed a plan for growth in 
the Denali area with an increase in campsites, camper amenities 
such as delis, gift shops, showers, a liquor store and other 
conveniences.
    This development plan--Denali National Park was required to 
do an economic impact on the surrounding businesses and an 
environmental impact. The environmental impact performed by the 
U.S. Wildlife Service showed that this was critical moose 
habitat where they planned to develop the campground and new 
facilities at and that it was a very critical habitat and would 
have negative impacts on the animals in the park.
    No economic study was done to see or realize an impact with 
the private sector. There was simply a statement that it was 
under-provided by the private sector. This was brought to the 
attention of Superintendent Steve Martin of Denali National 
Park, and with him the people voiced their concerns, 
businesses. The Denali Borough wrote resolutions in opposition 
of this growth.
    I have a whole packet of letters from campground owners and 
gift shop people in the Denali area, all private business, 
which I would like to give to you in support of small business 
and the damage that this development at Denali Park would do to 
us.
    Chairman Manzullo. Could you suspend for a second, Scott? 
The National Park Service was invited to participate at this 
hearing and specifically refused to get involved.
    You are telling me that they never did conduct an economic 
impact study?
    Mr. Reisland. No, sir.
    Chairman Manzullo. And they have never requested any 
documents from any of the affected businesses?
    Mr. Reisland. We got together and had a hearing with 
Superintendent Martin. I set up the meeting. The Denali Borough 
was present. We sent documents to them saying please look at 
our occupancy rates. Please look at the impact you will have on 
us. We were hoping that this would be solved in-house, the 
problem solved, and they would not continue with the 
development.
    This summer they are bulldozing huge areas of the park. I 
have pictures I have brought with me from Alaska showing all 
the new development. They disregarded our pleas and our 
occupancy rates and our information and moved forth.
    Chairman Manzullo. Why do you not go ahead and continue 
with your testimony?
    Mr. Reisland. Okay. The Denali National Park says well, we 
want to build rustic campsites. There are none available in the 
private sector. The outlying campgrounds, we are only two or 
three or five miles from this proposed development area.
    The private campground owners have developed showers, 
amenities, trying to draw visitors out of Denali Park and into 
the private campgrounds. We have a difficult time with this 
because the Park Service, with their large budgets, can offer 
small dollar costs for a campsite. We cannot come close to what 
they can offer because we have a host of taxes and maintenance, 
and we just do not have the budgets that the park has to run 
the business.
    The size. Superintendent Martin said that the growth is 
nominal. Well, he is talking 50 sites which equates to 5,500 
campsites which we will lose in the Denali area because the 
park fills up. We survive only off the overflow after the park 
has absolutely no vacancies, so we are taking the scraps left 
from the Park Service in the tourist industry, what is left 
over.
    We are talking about 5,500 camp nights. A season is about 
110 days in Denali. Everything is closed in the winter. This 
equates to about $100,000 that the nine campgrounds are going 
to lose directly from this development, and that is a lot of 
money for us.
    As I say, we are small mom and pop campgrounds, families 
that have been there, homesteaders from the early territory 
days of Alaska. Several. There are new people that have come in 
to develop since there has been a growth in tourism, which we 
are not seeing today. Tourism has actually dropped. Alaska is 
now below average in visitation for states nationwide in 
tourism.
    We have offered and we have shown the Park Service that we 
can accommodate the extra tourist load, which we do not really 
see. We are just very upset. I am here as a last resort to 
request some help from this Committee and the people that I am 
meeting here in Washington.
    We just have a lot of family businesses whose livelihoods 
are on the line directly because of the negative ramifications 
of the Park Service competing with us.
    Thank you.
    [Mr. Reisland's statement may be found in appendix.]
    Chairman Manzullo. Thank you very much.
    We have some fights going on on the Floor. I beg your 
forgiveness for the inconvenience, but I have to run and go 
down and vote. I will be right back.
    [Recess.]
    Chairman Manzullo. James Madison said that the Constitution 
was set up with a lot of hoops and loops and made purposely 
complex for the purpose of having good government. Forgive us.
    Our next speaker will be Tom Mack. Tom is the owner and 
president of Tourmobile, Inc., of Washington. Mr. Mack?

    STATEMENT OF TOM MACK, OWNER/PRESIDENT, TOURMOBILE, INC.

    Mr. Mack. Thank you, Mr. Chairman, for the privilege of----
    Chairman Manzullo. Mr. Mack, could you bring the mike 
closer to you?
    Mr. Mack. Thank you, Mr. Chairman, for the privilege of 
being present and to share with you and the Committee a real 
life example of how government can step in and provide unfair 
financial subsidies and support for a non-profit organization 
that intends to compete head on with a long time, tax paying, 
private company that is already under contract with an agency 
of the federal government to provide the same transportation 
service.
    It is longstanding federal government policy, as expressed 
in OMB Circular A-76, the government should not compete with 
its citizens. Our company, Tourmobile Sightseeing, began its 
operation in 1969 after having won a contract from a prospectus 
presented by the Park Service nationally, and after having won 
that contract we were sued by some agencies of the federal 
government, as a matter of fact, claiming that the Secretary of 
the Interior did not have the authority to issue such a 
contract.
    It is ironic that our relationship from that time on I 
would say for 20 years or more has been excellent, outstanding, 
but recently it is not what it has been, and communications 
have been poor.
    The organization that has threatened us now is called D.C. 
BID, District of Columbia Business Improvement District. This 
is a non-profit organization, but has enlisted the support of a 
large number of agencies of the federal government such as 
WMATA, the U.S. Department of Transportation, GSA, National 
Capital Planning Commission, and we even have information that 
the Smithsonian Institution had intended to join this 
organization as, as they call it, a stakeholder.
    We acquired this information under the Freedom of 
Information Act because we had heard rumors that our 
organization was being threatened, and we simply did not know 
how it could be threatened in that we had a contract that does 
not expire for another four and a half years.
    Nevertheless, the Washington Post, the Washington Business 
Times, the Washington Journal, all wrote stories about the 
intention of BID, which is largely represented by the District 
of Columbia, to propose and operate a service directly 
competitive with ours. The first time frame that I had was in 
the year 2001. They have since moved it to 2003 and later to 
2005. They change a lot, but their objective remains the same. 
It is to operate a competing service as ours on the national 
mall.
    In the beginning, and this is ironic, the Secretary of the 
Interior was challenged, questioning his authority to issue 
such a contract. The Supreme Court made a decision, which the 
Congress considers, the way it is, the way it is going to be, 
that the federal government has control over the federal 
enclave and certainly not an organization such as BID, which 
strongly represents the District of Columbia.
    The Park Service now appears to at least hold serious 
discussions with this organization, BID, and we learned under 
Freedom of Information that it has been doing so, communicating 
with them, for two years. Although the Park Service has written 
a letter to BID, to the mayor of the District, telling them in 
fact that our organization has a legitimate contract that will 
not be abrogated, we have the right to do what we are doing, it 
took them more than two years to write such a letter.
    During that time, some of my managers, certainly some of 
our employees, felt severely threatened. They did not know 
whether the stories printed in the media and the electronic 
media also were true and whether they would have a job.
    In a case like that, our company has been threatened to the 
point of possible destabilization. When the personnel are 
unhappy, when they are uncertain of what they may be doing, 
even in the face of attack that we have a contract, and I, of 
course, discussed that with them and told them, they 
nevertheless were shaken when they saw these articles in the 
newspaper and heard about it on television and on the radio.
    The downtown Business Improvement District has no 
experience operating a transportation operation. In its own 
statements it has indicated that it proposes hiring someone to 
do it for them on federal land. One of those is WMATA, the 
metro system. The metro has its hands full doing what it is 
presently doing. BID indicated that if Metro could not do it, 
it would take the authority to find someone else to do so.
    We were simply surprised that an organization like the 
National Park Service with whom we surely have had a close 
partnership would take more than two years to address this 
organization and tell them clearly and forthrightly you cannot 
do this, you cannot operate on the national mall, there is a 
concessionaire there who has operated 32 years and each and 
every year received high marks for performance.
    That again is disheartening when one works under those 
circumstances. The Park Service knows that this is unfair, 
unreasonable, but it did that.
    The real culprit here, however, I feel is BID, which was 
able to organize, to talk with and to get federal agencies to 
sign on as, as they call them, stakeholders, and sign 
documents, which we received again under Freedom of 
Information, that they would support such an operation.
    It is not possible for these organizations not to have 
known that a contract was already in existence. As a matter of 
fact, they even addressed the question arrogantly, in my 
opinion, feeling that they can get around it and especially 
since the National Park Service was present at their meetings I 
believe from the very beginning.
    We are continuing our operation now. We expect to continue 
it. We feel that after having served 50 million people over the 
32 years that the quality of service speaks for itself, and we 
hope that even after our contract ends in four and a half years 
a service similar to ours can continue to operate consistent 
with the Supreme Court decision that pointed out very clearly 
that the Secretary of the Interior had undeniable control over 
the federal mall and national parks.
    Chairman Manzullo. How are you doing on time there, Mr. 
Mack?
    Mr. Mack. Sir?
    Chairman Manzullo. How are you doing on time?
    Mr. Mack. I am fine.
    Chairman Manzullo. Okay. Did you finish your thoughts?
    Mr. Mack. I did, sir. I simply wanted to thank you and the 
Committee for this opportunity and to share an unfair 
competition plight in which I and my company are the intended 
victims.
    [Mr. Mack's statement may be found in appendix.]
    Chairman Manzullo. Our next witness is Dan Mastromarco. 
That is a good Swedish name like Manzullo.
    Mr. Mastromarco. That is exactly right.
    Chairman Manzullo. He is with the Travel Council for Fair 
Competition. We look forward to your testimony.

     STATEMENT OF DAN MASTROMARCO, TRAVEL COUNCIL FOR FAIR 
                          COMPETITION

    Mr. Mastromarco. Thank you. I appreciate it. I want to 
begin by thanking you, Mr. Chairman, and also your staffer, 
Matthew Szymanski, for putting this hearing together and 
focusing on this very important issue.
    My name is Dan Mastromarco, and I am executive director of 
the Travel Council for Fair Competition, which is a coalition 
of several small business trade associations that includes the 
National Tour Association, the American Society of Travel 
Agents, the American Bus Association, the American Hotel and 
Motel Association, America Outdoors and the National Park 
Hospitality Association.
    We are formed to accomplish two objectives. First, to raise 
public awareness of the problem of unfair competition both with 
respect to government competition and non-profit unfair 
competition, second, to defeat misguided public policies which 
contribute to that problem.
    Mr. Chairman, two small business owners, as you know, have 
joined me on this panel. One has literally crossed the tundra 
during his peak business season to tell his story. The other is 
the general manager of Tourmobile, a fixture in this nation's 
capital. Let me also introduce, as you pointed out, Mr. 
Reisland's son, Donovan, who is sitting behind me, who is 
exercising his own sort of oversight over our function today. 
What we are here to do is to prevent Mr. Reisland and Mr. Mack 
from becoming Mr. Tucci on the first panel: in other words, put 
out of business because of federal competition.
    Let me begin by saying that I hope this Committee can help 
their individual concerns. If you cannot, who will? Their 
presence here demonstrates the degree to which their 
livelihoods are so deeply affected by unfair competition. In a 
larger sense, however, these gentlemen did not come here to 
represent their special interests or their business. They come 
to symbolize the national threat of an abuse that cries out for 
constant vigilance and prioritization.
    Allow me to make a few observations. First, unfair 
competition is not localized, not sporadic and not confined to 
one business or industry. It is burgeoning, it is widespread, 
and if you so chose to you could extend these hearings several 
days on the problem confronting small business in the travel 
industry alone. Broaden that to affected industries, and you 
would not have to leave this room.
    Second, Mr. Chairman, it is not new. If we were to imply 
that this is a new issue, the ghosts of the 1933 and 1955 
Congress would visit upon us. The history of unfair competition 
is marked with a cavalcade of abuses and failed efforts to 
correct them over more than three-quarters of a century.
    Third, the position of small business is not wishy-washy. 
It is unequivocal. Mr. Chairman, TCFC members possess a 
fundamental philosophy that has deep roots in the tenets of our 
republic. Government should not be engaged in activities that 
can be fulfilled by private enterprise. The existence of small 
businesses are proof positive that government need not be 
duplicating their efforts.
    We share this philosophy with good company. More than two 
centuries ago, Thomas Jefferson had this to say. ``Let the 
general government be reduced to foreign concerns only except 
to commerce, which the merchants will manage the better the 
more they are left free to manage for themselves, and our 
general government may be reduced to a very simple organization 
and a very inexpensive one; a few plain duties to be performed 
by a few servants.''
    Let us compare his words to no less an authority than the 
manifesto of the Communist party by Karl Marx and Fredrick 
Engels. It describes a state of affairs that would come to 
fruition once Communism takes root as, ``Centralization of the 
means of communication and transport in the hands of the 
government . . . extension of factories and instruments of 
production owned by the state . . . and establishment of 
industrial armies.''
    Mr. Chairman, government competition is fundamentally 
unfair because the government enjoys numerous and 
unquantifiable advantages. It is inefficient. As comedian P.J. 
O'Rourke said, effectively translating Jefferson's words into 
the modern age, ``You cannot get good Chinese take out in China 
nor Cuban cigars, and Cuban cigars are rationed in Cuba.''
    Well, let me in the interest of expediency move to what I 
think this Committee should look toward and seek to accomplish. 
First, it is important, Mr. Chairman----
    Chairman Manzullo. You are about a minute overdue now.
    Mr. Mastromarco. Oh, okay.
    Chairman Manzullo. Could you finish up in a minute so we 
can make sure Mr. Hart testifies----
    Mr. Mastromarco. I certainly will.
    Chairman Manzullo [continuing]. Before the bells go off 
again?
    Mr. Mastromarco. All right. I think that it is important 
that this Committee exercise constant vigilance by jealously 
and liberally using your oversight function.
    Second, concentrate on specific agencies as you have done 
in this hearing.
    Third, work with the Administration to develop a cohesive 
national strategy for reliance on the private sector. You know, 
nearly a quarter of a century ago GAO recommended a single 
national policy endorsed and supported by both the legislative 
and executive branches, and their report is as valid then as it 
is today.
    Let me just conclude in the following way. As your staff 
advances into this issue, they will hear from naysayers that 
the problem cannot be solved. That is the time in which you 
wish to look back to this hearing and think about our industry, 
a quintessentially commercial industry.
    Why is the government more cost effective in operating a 
tour bus or means of transportation, running campgrounds, mass 
transit, rafting trips? These are quintessential commercial 
activities.
    We appreciate your time.
    [Mr. Mastromarco's statement may be found in appendix.]
    Chairman Manzullo. Thank you very much. It is kind of hard 
to get everything into five minutes.
    Our next witness is Clyde Hart, Jr. Clyde the vice-
president of the American Bus Association. He is here at the 
request of Ms. Velazquez dealing with a very interesting 
situation going on in New York.
    Mrs. Velazquez is tied up in a meeting. She extends her 
apologies. We appreciate the fact that you are here. Go ahead, 
Mr. Hart. We look forward to your testimony.

  STATEMENT OF CLYDE HART, JR., VICE-PRESIDENT, AMERICAN BUS 
                          ASSOCIATION

    Mr. Hart. Thank you, Mr. Chairman. Good afternoon. My name 
is Clyde Hart, and I am the vice-president of government 
affairs for the American Bus Association.
    The ABA is a national trade association representing the 
interests of the private intercity motorcoach industry. ABA is 
comprised of approximately 3,400 member companies that operate 
buses and provide related services to the motorcoach industry.
    A.B.A. members provide all manner of bus services to 775 
million U.S. bus passengers annually. Our roster of members 
includes nationally known intercity bus passenger carriers, 
regional carriers and family owned businesses across the 
nation.
    I am here to make you aware of a serious problem that 
affects the private bus industry, specifically the problem of 
unfair competition from publicly funded transit agencies, 
universities and national parks.
    First a few words about the motorcoach industry represented 
by ABA. The industry serves more than 4,000 communities 
directly with scheduled or fixed route service. The industry is 
a small business success story, comprising almost 4,000 
companies of which 90 percent operate fewer than 25 buses. The 
motorcoach industry accomplishes all this and more with the 
highest safety rating of any commercial passenger 
transportation mode and all without benefit of government 
subsidy.
    This lack of subsidy is the core of my testimony. ABA 
members face increased competition from transportation 
providers that are subsidized. Not a week goes by without a 
call from an ABA member company complaining of a transit agency 
that has failed to provide proper notice as required by federal 
law of their intent to compete for a charter job or, worse, 
having lost their job to a subsidized carrier.
    Many times ABA is not notified of the charter bid, again as 
required by law. In addition, there have been instances where 
the FTA has advised transit agencies how to structure proposed 
charter operations to circumvent the charter regulations and 
pass legal muster.
    The ABA keeps a record of examples of public transit agency 
incursions into charter operations. There are many. Just a few 
examples include: in Oregon local transit agencies provided 
free passes and charters, compliments of local transit 
agencies, to conventioneers and guests.
    In North Carolina, a local transit agency provided charter 
transportation for college basketball tournaments and 
conventioneers. And in Maine, when a local transit agency bid 
out a fixed route service, private companies did not win the 
bid because the local transit agency's true overhead, as well 
as higher tax exemptions on fuel, were not calculated fairly.
    These practices by public transit agencies have a 
deleterious effect on our members and on the riding public. 
Having one's business peeled away like an onion means that the 
operation will, in time, lose the ability to provide service 
elsewhere along its system.
    The FTA has actively encouraged the subsidized competition 
in the past. For example, the charter restrictions do not apply 
to transit service that is scheduled service rather than 
charter. As long as the transit agency can plausibly claim that 
the service falls outside the definition of charter service 
then the private operator may not challenge the transit 
service.
    There is a growing problem with public transit agencies 
providing intercity service. While there is nothing in the law 
that allows public transit agencies to offer such service while 
receiving FTA grant money, there is nothing in the law that 
expressly prevents it. This is because there is simply no 
workable definition of intercity service in the law.
    Indeed, FTA has determined that intercity service is merely 
scheduled service for the general public with intermediate 
stops over fixed routes connecting two or more urban areas. 
Given this limited definition, it is no wonder that we are 
treated to the spectacle of public transit systems offering 
intercity system.
    A.B.A. needs Congress and the FTA to establish a workable 
definition of intercity service for all types of bus 
operations. Greyhound Bus Lines, for example, has complained of 
local public transit systems linking together to provide 
intercity service in California. Indian Trails Bus Company has 
lodged a similar complaint in Michigan. Without such a workable 
definition, it may quite literally be possible for the New York 
transit system to offer intercity service between New York City 
and Chicago, Illinois.
    Even unlikely publicly subsidized organizations are 
beginning to encroach on the private market. The Flagstaff 
Public School System, which owns and operates its own bus fleet 
in cooperation with Northern Arizona University, also provides 
charter service. The school district states they do ``this to 
keep their drivers employed'' during the summer.
    Congress can resolve these concerns in two ways. First, 
require FTA to establish a clear definition of inter city 
service that is not eligible for federal funding. Second, 
specifically provide that transit agencies may not provide 
regular route service beyond their urban area boundaries.
    On behalf of the ABA and its members, I want to thank you 
and the Committee for the opportunity to address these issues.
    [Mr. Hart's statement may be found in appendix.]
    Chairman Manzullo. We appreciate that very much.
    Again, I ask your apology for these beepers going on and 
off with the votes. That is the reason why other Members are 
not here as they had to hurry off to other engagements.
    Scott, I have some problems with the way this whole issue 
of information and making the park land into a recreation area 
came about and what was furnished to the small business people. 
My understanding is that you and was it seven other retail 
owners are clustered around Denali? Is that correct?
    Mr. Reisland. That is correct. We are located all within--
our personal business is right on the south boundary of Denali 
Park, which is six miles from the visitors center where 
everyone goes at the entrance to the park.
    Within an eight mile radius of that visitors center there 
is the north boundary of the park, and there are campgrounds 
and all types of camper amenities, gift shops, book stores. We 
are right within a six, seven, eight mile area as close as we 
can get to the park itself without being in the park, of 
course, yes. There are quite a few businesses aside from camper 
parks that are also being affected.
    Chairman Manzullo. Denali, prior to this major 
construction, did offer campsites? Is that correct?
    Mr. Reisland. Yes.
    Chairman Manzullo. How many sites did they offer?
    Mr. Reisland. Riley Creek, which currently has existed for 
many years, is 100 campsites, and that is the largest 
campground in all the area.
    They also have a campground about a couple miles away from 
Riley Creek, which is called a rustic camping site, Marino 
Campground, which is run by the park. That is 60 sites. They 
also have campgrounds on into the park.
    Chairman Manzullo. And those have been there for some time?
    Mr. Reisland. Yes, they have.
    Chairman Manzullo. How many spaces, how many sites, do they 
want to add?
    Mr. Reisland. Fifty.
    Chairman Manzullo. Fifty. But they also want to add a bunch 
of amenities? Is that correct?
    Mr. Reisland. Correct.
    Chairman Manzullo. My understanding also is that normally 
the park fills up first, and then the eight retailers have 
enough of the overflow?
    Mr. Reisland. Absolutely. The park fills up first for 
camping, and then the people cannot find a spot to camp so they 
start trickling out to the boundaries of the park and going to 
the public or private campgrounds. Private campgrounds.
    Also with the park developing the 50 more sites, we will 
lose the ancillary benefit of campers in our campgrounds, you 
know, buying from our gift shops, from our little grocery 
stores, so we will also lose money not only on hard camp nights 
and the money from paying for a campsite, but also in ancillary 
propane sales and that sort of thing.
    Chairman Manzullo. When people buy items inside the park, 
do they have to pay sales tax?
    Mr. Reisland. No, they do not.
    Chairman Manzullo. So the local communities become deprived 
to a great extent of sales tax revenues by these items being 
purchased inside the park?
    Mr. Reisland. That holds true also with the camping 
facilities. The private campgrounds outside the park boundaries 
pay taxes to the Denali Borough, which runs the ambulance 
services, the fire and a whole host of different programs, 
which the park is tax exempt from paying anything to the Denali 
Borough, yet they reap the rewards of our tax dollars for 
getting ambulance service in the park and fire department 
service. That is correct.
    The Denali Borough has written a resolution. You will get a 
packet as soon as we can copy it that shows resolutions from 
the Denali Borough and the mayor strongly opposing the park in 
this development because they will lose what is called 
overnight tax, overnight accommodation tax that we have in 
Alaska.
    Chairman Manzullo. The National Park Service, though, 
complains that they are 20 years behind in construction and 
about what, $8 billion short of the money that they need just 
to maintain their present facilities. Have you heard those 
figures, Scott?
    Mr. Reisland. I imagine they were behind. At one time the 
park was the only thing out there and so there was a reason for 
them to have a liquor store and offer a little store and 
amenities because that was it. It was all wilderness, several 
hundred miles away from Fairbanks or about 400 miles away from 
Anchorage. If you were to go to Denali, you needed those 
services.
    Since then, the highway has come through between Fairbanks 
and Anchorage, and it has become a lifeline between the two 
with Denali Park in the center. Private enterprise has 
developed unbelievably in that area to take up and provide 
services for folks traveling to Denali.
    I do not see why they need to expand any more of their own 
facilities because private enterprise is more than willing to 
supply anything the park can provide and more.
    Chairman Manzullo. Who is the person with whom you were 
having conversations at the National Park Service?
    Mr. Reisland. Superintendent Steve Martin.
    Chairman Manzullo. And he is at Denali?
    Mr. Reisland. At Denali.
    Chairman Manzullo. Has he been cooperative with you?
    Mr. Reisland. What he has told us--we have had meetings. We 
have really wanted him to do a real economic impact study, so 
we gave him what we have in our facilities, how many campsites 
we have, how many electric RV sites, how many dry camping 
sites.
    We gave him all this information hoping that he would look 
at it and see the light that hey, there is a--we can 
accommodate the increase in terms of outside the park in the 
private sector, but he has taken a position that we are 100 
percent occupied, and they need to do the development.
    Chairman Manzullo. Is that his decision to make, or does it 
come from higher up in Washington?
    Mr. Reisland. I do not know.
    Chairman Manzullo. It would be interesting to find out.
    Mr. Reisland. We have worked and tried very hard. The 
borough and the private sector has worked very hard to try to 
persuade Superintendent Martin to not go through with this.
    Chairman Manzullo. At what stage is the construction?
    Mr. Reisland. They are currently bulldozing, plowing trees, 
clearing land for this development.
    Chairman Manzullo. What we are going to do is, I would like 
you to get the information on the loss of business, the fact 
that you are not 100 percent occupied, and get that to Attorney 
Szymanski.
    We will send a letter to the superintendent and request 
that he answer within a relatively short period of time. If he 
does not, then he might be sitting here in Washington under 
subpoena.
    I am very disappointed with the fact that the National Park 
Service is discourteous in not sending somebody here to 
represent them. I just cannot, you know, blowing off a 
Congressional Committee on items this critical.
    Is anybody in this room here from the National Park 
Service? No representatives at all?
    Mr. Mastromarco. If they were, I am not sure they would 
admit it.
    Chairman Manzullo. You know, they would have been sent 
here. I did not say that to embarrass anybody, but not having 
anybody here to testify is not--you do not do that.
    Mr. Reisland. Sir, we have the list of all documents in 
support.
    Chairman Manzullo. Matt, if you could write that letter? We 
will get on that right away. I have a question to ask you, Mr. 
Mack. We hear nothing but great compliments of the Tourmobile. 
As people contact our office, we let them know that this is the 
best way to get around in Washington.
    My first question to you is, is there a need for another 
service? In other words, are all your coaches filled all the 
time? Are there people that are turned away from your service 
that would necessitate another line coming in?
    Mr. Mack. No, there is not a need for another service. We 
are well serving those people who are interested in getting on 
our service.
    We at one time carried upwards of two million people 
annually. Presently we are carrying about 1.4 million or 1.5 
million.
    Chairman Manzullo. Is there a reason for that?
    Mr. Mack. Increased competition. You know, really the Park 
Service could address a question like this, but one thing is 
very clear. Information that we received, again from a Freedom 
of Information request, is that our operation does not do as 
well as it might because the Park Service has not done what it 
said it intended to do in the first place, which was under the 
old and esteemed McMillen Plan, the federal plan, was intended 
to be a pedestrian mall with a mass transportation system 
operating throughout with an absence of traffic and parked 
cars.
    I know that the Park Service has tried to some extent to do 
that. They do acknowledge that it is a problem. They have not 
been able to achieve it. That to a fair extent decreases our 
ability to accomplish what we might otherwise do.
    There is no need certainly, absolutely not, for a service 
similar to ours there now as we are there.
    Chairman Manzullo. Would they be running the same routes as 
you?
    Mr. Mack. The one proposed by BID covers our route, yes, in 
addition to others throughout the city. Their objective, as 
clearly stated in their information, which we have, is their 
title suggests what they intend to do, business improvement 
district.
    At the top of their circulator plan they state their 
intention, and their intention is to take people, tourists, off 
the mall and take them throughout the city of Washington.
    Chairman Manzullo. In the information that you gave us 
appears this interesting statement by BID. It says, ``The 
purposes of the Tourmobile and the circulator are different. 
However, as the Tourmobile is an interpretive service to 
present and explain the area to visitors, the circulator's 
function is transportation and marketing.'' Come on.
    Mr. Mack. That is their intention. However, they are 
relegating the importance of a very old Park Service tradition 
I believe started by----
    Chairman Manzullo. That is like giving them straight As.
    Mr. Mack. President Theodore Roosevelt, and that is one of 
interpretation. That is part of the Park Service's job to 
interpret. You find Park Service personnel at monuments, 
memorials, battlefields, various places, historic houses. I am 
pleased to say that it was the Park Service's very good idea.
    Chairman Manzullo. That is how they are trying to 
circumvent breach of contract is to say it is something 
different.
    What does Tourmobile have, 22 or 23 different stops 
throughout the----
    Mr. Mack. Yes, sir. Twenty-five.
    Chairman Manzullo. Twenty-five different stops. The people 
get on and off. They get back on with shopping bags full of 
stuff and do all kinds of things on that tour, do they not?
    Mr. Mack. Yes. Yes, sir.
    Male Voice. And learn a lot about the District.
    Chairman Manzullo. They learn a lot about the District, buy 
a lot of things and pay a lot of sales tax.
    I cannot see any qualitative distinction between what you 
are doing and what they are trying to do.
    Mr. Mack. I see their intention is to expand their 
business. They are into a lot of things. We got their annual 
report--it is a financial report--off of the web and discovered 
some of the things that they are doing. They are doing a lot of 
things, but they are subsidized.
    Chairman Manzullo. For example?
    Mr. Mack. Helping the homeless, cleaning streets, offering 
information to tourists, among other things, but it is 
subsidized by the District government primarily. And now they 
feel that, whether that has been successful or not I am not 
qualified to say, but it is clear here that their next 
intention is to get into the transportation business.
    Chairman Manzullo. Did you have some questions from Mrs. 
Velazquez that you wanted me to ask to Mr. Hart on the issue in 
New York?
    Female Voice. No.
    Chairman Manzullo. Okay. There is some kind of a conference 
coming up in New York that a bid went out recently with a 
private carrier in the city?
    Mr. Hart. Yes. I am confused a little bit, Mr. Chairman, 
because there are conferences in New York City all the time, 
but I do remember Rochester Transit getting a bid to provide 
transportation to a conference while in New York City.
    Chairman Manzullo. That is correct.
    Mr. Hart. Yes. Again, we think that is just something that 
a private business could do.
    Chairman Manzullo. Do you have more details on that?
    Mr. Hart. I could certainly provide them for you, Mr. 
Chairman.
    Chairman Manzullo. Okay. If you could, I would appreciate 
it very much.
    Mr. Hart. Certainly.
    Chairman Manzullo. I appreciate you all coming here. I 
again appreciate the indulgence of the time.
    Scott, you came all the way. You literally crossed the 
tundra to come here. How long are you going to be in 
Washington?
    Mr. Reisland. I will leave, sir, on the 21st, so I will get 
to do some sightseeing, which I am very excited about and my 
son is very excited about.
    Chairman Manzullo. Well, if there is anything that our 
office can do personally, stop on by. We will give you tickets.
    I expressed to Mr. Young here, a Member of Congress, that 
you were here, and I know he wanted to stop by and exchange 
hellos with you, but that just was not possible.
    Again, I want to thank all of you for coming. All of your 
statements will be made part of the permanent record.
    This Committee is adjourned.
    [Whereupon, at 1:40 p.m. the Committee was adjourned.]
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