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95–184 PDF 2004

S. HRG. 108–550

ENHANCING THE ROLE OF THE PRIVATE

SECTOR IN PUBLIC TRANSPORTATION

HEARING

BEFORE THE

SUBCOMMITTEE ON HOUSING AND TRANSPORTATION

OF THE

COMMITTEE ON

BANKING, HOUSING, AND URBAN AFFAIRS

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

ON

THE CURRENT ROLE OF THE PRIVATE SECTOR IN PROVIDING PUBLIC

TRANSPORTATION SERVICES, WHAT BARRIERS EXIST TO INCREASING

THAT ROLE, AND WHAT MIGHT BE DONE IN REAUTHORIZATION TO

REDUCE THESE BARRIERS

JULY 23, 2003

Printed for the use of the Committee on Banking, Housing, and Urban Affairs

(

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

RICHARD C. SHELBY, Alabama, Chairman

ROBERT F. BENNETT, Utah

WAYNE ALLARD, Colorado

MICHAEL B. ENZI, Wyoming

CHUCK HAGEL, Nebraska

RICK SANTORUM, Pennsylvania

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

JOHN E. SUNUNU, New Hampshire

ELIZABETH DOLE, North Carolina

LINCOLN D. CHAFEE, Rhode Island

PAUL S. SARBANES, Maryland

CHRISTOPHER J. DODD, Connecticut

TIM JOHNSON, South Dakota

JACK REED, Rhode Island

CHARLES E. SCHUMER, New York

EVAN BAYH, Indiana

ZELL MILLER, Georgia

THOMAS R. CARPER, Delaware

DEBBIE STABENOW, Michigan

JON S. CORZINE, New Jersey

KATHLEEN L. CASEY, Staff Director and Counsel

STEVEN B. HARRIS, Democratic Staff Director and Chief Counsel

SHERRY LITTLE, Legislative Counsel

RICHARD STEINMANN, Congressional Fellow

SARAH A. KLINE, Democratic Counsel

AARON D. KLEIN, Democratic Economist

JOSEPH R. KOLINSKI, Chief Clerk and Computer Systems Administrator

GEORGE E. WHITTLE, Editor

SUBCOMMITTEE ON HOUSING AND TRANSPORTATION

WAYNE ALLARD, Colorado, Chairman

JACK REED, Rhode Island, Ranking Member

RICK SANTORUM, Pennsylvania

ROBERT F. BENNETT, Utah

LINCOLN D. CHAFEE, Rhode Island

MICHAEL B. ENZI, Wyoming

JOHN E. SUNUNU, New Hampshire

RICHARD C. SHELBY, Alabama

DEBBIE STABENOW, Michigan

JON S. CORZINE, New Jersey

CHRISTOPHER J. DODD, Connecticut

THOMAS R. CARPER, Delaware

CHARLES E. SCHUMER, New York

TEWANA WILKERSON, Staff Director

(II)

CONTENTS

WEDNESDAY, JULY 23, 2003

Page

Opening statement of Senator Allard .................................................................... 1

Opening statements, comments, or prepared statements of:

Senator Reed ..................................................................................................... 3

Senator Sarbanes .............................................................................................. 13

Senator Corzine ................................................................................................ 28

WITNESSES

Irwin Rosenberg, President, American Transit Services Council, Vice President of Government Relations, Laidlaw Transit Services, Inc. ........................ 4

Prepared statement .......................................................................................... 28

Robert Molofsky, General Counsel, Amalgamated Transit Union ...................... 6

Prepared statement .......................................................................................... 55

Peter J. Pantuso, President and Chief Executive Officer, American Bus

Association ............................................................................................................ 9

Prepared statement .......................................................................................... 62

Margie Wilcox, Co-Chair of the Paratransit and Contracting Steering Committee, Taxicab, Limousine, and Paratransit Association ................................ 11

Prepared statement .......................................................................................... 136

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

GAO—Transit Labor Arrangements—Most Transit Agencies Report Impacts

Are Minimal .......................................................................................................... 146

Statement of the National School Transportation Association dated July 23,

2003 ....................................................................................................................... 183

(III)

(1)

ENHANCING THE ROLE OF THE PRIVATE

SECTOR IN PUBLIC TRANSPORTATION

WEDNESDAY, JULY 23, 2003

U.S. SENATE, SUBCOMMITTEE ON HOUSING AND TRANSPORTATION, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, Washington, DC.

The Subcommittee met at 2:31 p.m. in room SD–538 of the Dirksen Senate Office Building, Senator Wayne Allard (Chairman of

the Subcommittee) presiding.

OPENING STATEMENT OF SENATOR WAYNE ALLARD

Senator ALLARD. I am going to call to order the Subcommittee on

Housing and Transportation of the Banking Committee.

I want to welcome the witnesses. First of all, both myself and

Senator Reed will probably have opening statements, and we may

have a lot of Members that will be coming in and out. We will just

play it by ear. When they come in, we will interrupt the proceedings so they can make their statements.

We will have a five-minute limit on your statement. I will just

make your full statement a part of the record. We will ask you to

limit your comments and testimony to 5 minutes. We will not enforce it rigorously, but stay close to 5 minutes if you would please.

With that, I will go ahead and start with my opening statement,

and by the time I have finished, I have a feeling that probably Senator Reed will be here.

I am very pleased to convene this hearing of the Housing and

Transportation Subcommittee to consider enhancing the role of the

private sector and public transportation. This hearing will be an

important part of the Committee’s work to reauthorize TEA–21,

and I believe that this forum will give us an opportunity to explore

many critical issues as we move forward in that process.

While transportation is often considered a public sector activity,

it is actually a combination of both private and public sectors. In

fact, Federal transit law calls for Federal grant recipients to encourage to the maximum extent possible the participation of private enterprises. I am interested in learning how this is working.

Private contracting has the potential to save money, improve

service, and increase flexibility. Therefore, I strongly support allowing State and local decisions regarding competitive contracting for

transit—free Federal inhibitions. I also strongly support a level

playing field with fair competition between public and private operators when an area chooses to contract.

2

That is not to say that competitive contracting is right for every

city or in every situation. On the contrary, public transit workers

are an integral part of transit service, just as the private operators

are. I hope that we all share the goal of wanting to promote transit

by investing scarce taxpayer dollars as carefully as possible. When

a public-private partnership is the most effective, efficient means

to provide transportation services, the Federal Government should

not stand in the way.

Denver, in my home State of Colorado, is one example of an area

that made the decision to contract and has done so successfully. In

1988, the Colorado Legislature mandated Denver’s Regional Transportation District, which we refer to as RTD, to competitively contract 20 percent of its best service and response to spiraling costs.

The contracting helped lead to lower costs and higher ridership.

During the 9 years before contracting, expenditures rose 8.7 percent, while service levels were reduced by 12.6 percent. During the

9 years after competitive contracting expenditures rose by only 4.3

percent, and service levels increased by 34.3 percent. Internal estimates show that RTD saved nearly $100 million over

10 years through competitive contracting. Obviously, something

was working because in 2000, the State increased the contract

mandate to 35 percent, and the State Legislature considered increasing the contracting mandate even further.

San Diego has also had great success in choosing to competitively

contract some of its services. In 1980, local officials began their efforts to create competition in bus service. Today, nearly half of

their bus service is awarded on a competitive basis. Contracted

costs are about 30 percent less than noncontracted costs. However,

the noncontracted costs have also decreased in response to the competition. As a result, San Diego has been able to increase its bus

service level since 1979 by 82 percent, while total operating costs

have only risen by 7 percent on an inflation-adjusted basis. These

are just two examples of how a public-private partnership can be

an effective approach to providing transportation services.

I am pleased that the Administration has made several suggestions to remove barriers to competition in the SAFETEA proposal.

First, they proposed making private operators eligible recipients of

Federal formula funds, which would allow private operators to

have an opportunity to participate in transportation development.

They would also be eligible to receive grants for the provision of

public transportation services that they define and deliver.

The Administration also proposes creating a more nuanced enforcement tool for violations of the prohibition against using taxpayer-subsidized services to compete against the private sector.

Currently, the only enforcement tool is for the FTA to withhold all

Federal funding. Because this is so draconian, it is never used,

which has allowed abuses to occur. A wider range of penalties

would allow FTA to better match the penalty with the violation.

While SAFETEA makes some encouraging steps, I am interested

in hearing what further steps this Committee should consider in

regards to the private sector. Accordingly, I have invited a number

of witnesses here today to express their views on the matter.

First, we have Mr. Irwin Rosenberg, who is a Vice President at

Laidlaw Transit Services Incorporated. He is testifying on behalf of

3

the American Transit Services Council whose members provide

contract service across the country.

Second, we have Mr. Bob Molofsky, who is the General Counsel

for the Amalgamated Transit Union. ATU is the largest transportation labor union with 180,000 members.

Third, we have Mr. Peter Pantuso, who is the President of the

American Bus Association. ABA is the trade association of the

intercity bus industry. ABA members transport 774 million passengers each year and often provide the only transportation service

to rural areas.

Finally, we will hear from Ms. Margie Wilcox, who is testifying

on behalf of the Taxicab, Limousine, and Paratransit Association.

Their members contract for a great deal of the paratransit services

and transport two million passengers in total each day.

I am eager to hear your views regarding the opportunities currently available to the private sector, barriers that exist for private

sector participation, impediments that exist for a locality to competitively contract for transit services, and suggestions for changes

as the Committee moves to complete TEA–21 reauthorization.

I want to thank the panel for being here today, and I look forward to your testimony. Prior to hearing from you, I want to give

Senator Reed, from Rhode Island an opportunity to make his opening comments.

Senator Reed.

STATEMENT OF SENATOR JACK REED

Senator REED. Thank you very much, Mr. Chairman, and thank

you for scheduling this hearing. I am eager to hear from the witnesses. We have recently received the SAFETEA from the Administration, and I am glad because we now can begin to analyze the

Act and try to incorporate also some of the hearings that we held

last Congress. We had a series of hearings on these issues in anticipation of the reauthorization.

One of the conclusions from these hearings is that TEA–21, with

its flexibility, works very well, but it could use additional resources

to make it work even better across the country. And it is my understanding that there is robust participation in transit and that this

participation exists in no small part to the flexibility and the emphasis in TEA–21 on leaving many service decisions to the States

and to municipalities. I think this local orientation and this local

choice is an important aspect of TEA–21’s success and something

of which I am supportive.

According to research by the Transportation Cooperative Research Program, most transit systems have some level of private

participation and find that the current laws’ flexibility suits their

needs well. There are examples of both success and failure when

it comes to privatization, and my State has experienced both, but

I think it once again vindicates the value of local decisionmaking

and the flexibility to make those decisions.

While I believe the current law provides sufficient avenues for

private participation and that there is always the potential for increased participation, I think we also have to recognize too that

these issues sometimes bring up, either wittingly or unwittingly,

4

the issue of labor and its role in the delivery of transit services

across the country.

I look forward to today’s testimony and, indeed, I look forward

to participation with the Chairman in the evaluation of the

SAFETEA proposal and hopefully moving in the direction of reauthorization.

I also would note, Mr. Chairman, I believe there is a vote on.

Senator ALLARD. Yes. I am just looking at it. We have a vote to

table the Hollings Amendment on the floor. We will run down

quickly, cast our vote, and get right back to you.

Senator REED. Thank you.

Senator ALLARD. It will probably be about 10 minutes or so. In

the meantime, this Committee will stand in recess.

[Recess 2:40 p.m. to 2:56 p.m.]

Senator ALLARD. The Subcommittee on Housing and Transportation will come back to order.

Now, we will hear from the panel members, and I would like to

start with Mr. Rosenberg, Area Vice President, Laidlaw Transit

Services, Incorporated. I understand you will be testifying on behalf of the American Transit Services Council. We will move down

the table and call on Mr. Molofsky, General Counsel, Amalgamated

Transit Union; and then Mr. Peter Pantuso——

Did I pronounce your name right?

Mr. PANTUSO. That is very good. Thank you, Mr. Chairman.

Senator ALLARD. —President and Chief Executive Officer of

American Bus Association, and Margie Wilcox, Co-chair, Paratransit and Contracting Division, Taxicab, Limousine, and Paratransit Association.

Let’s proceed with you, Mr. Rosenberg.

STATEMENT OF IRWIN ROSENBERG, PRESIDENT

AMERICAN TRANSIT SERVICES COUNCIL

VICE PRESIDENT OF GOVERNMENT RELATIONS

LAIDLAW TRANSIT SERVICES, INC.

Mr. ROSENBERG. Thank you, sir.

Mr. Chairman, Mr. Ranking Member, and honorable Members of

the Subcommittee, thank you very much for allowing me the honor

to testify today on behalf of the American Transit Service Council.

I am Irwin Rosenberg. I am the President of the Council and Vice

President for Laidlaw Transit Services, one of the Nation’s largest

providers of contract services, and in fact, an operator of the

Denver RTD service, which you mentioned, Mr. Chairman and the

San Diego services. And the ATSC does provide service across

the country in virtually every community that everyone of the

Members represent here, operating approximately 12,000 vehicles

nationwide.

Although the competitive contracting market has grown over the

past two decades, primarily during 1984 and 1993, it is increasingly evident that there continues to be attitudinal and policy barriers toward the broad use of competitive contracting to provide

public transportation services in a very cost-effective and efficient

manner.

According to the TRB 2001 report, ‘‘Contracting for Bus and Demand Response Transit Services,’’ 40 percent of all Federal aid

5

transit recipients contract for no services at all. Competitive contracting can be a very effective tool, allowing public transit agencies to be more responsive to its customers, implement effective

controls on cost and improve and ensure quality service through

proper performance standards.

Of course, additional competitive contracting benefits include the

shifting of risk, and the reduced cost and cost control. As you mentioned, Mr. Chairman, in Denver, Colorado, the difference is $21.89

per hour between the in-house contracted service and those services provided by the contractor.

And, in fact, in Houston, I heard Jim Cunning, one of the board

members, yesterday, just say that since they started contracting for

one division, they have saved $23.2 million over just the past few

years. It allows the public sector to extend funds that are so necessary and limited in terms of capital investment. It helps them to

manage service quality better. It creates a competitive labor environment, and it allows for the public-sector resources to be appropriately focused on planning and policy development for systems.

Opponents historically attempt to confuse the issue by suggesting

what we are advocating is full privatization. This is not the case.

We are here to ask you to support legislative language within any

legislation reauthorizing TEA–21 that encourages the inclusion of

the private sector to the maximum extent feasible; for example, repeal Section 5305(e)(3) and reward efficiency and increased ridership by adopting the proposals we have submitted with our written

testimony for incentives that are tied not only to ridership, but to

efficiency also. Competitive contracting for service based on competition does not eliminate the responsibility of transit agencies to

determine policy, plan service nor assure it is delivered in an efficient and cost-effective manner. When the services are contracted,

agencies continue to set standards and are responsible for the financial accountability of public funds.

Competitive contracting does not mean nonunion either. Thousands of employees working for ATSC member companies across

America are represented by the Teamsters, by ATU, and by SEIU

and many other unions. It has been clearly demonstrated and proven that competitive contracting is not an attempt to avoid collective

bargaining process. In fact, consider Charleston Area Regional

Transit Authority where, in a Right-to-Work State, they actually

contracted in order to ensure that the employees were represented

by collective bargaining agreements.

American Transit Services Council members are able to provide

essential capital and extend to their customers the value of their

resources and in-depth experience through their national purchasing relationships and innovations.

From 1984 to 1993, the Congress and Administration initiated

and supported growth and competitive contracting through legislation and Federal policy that encouraged the use of the private sector. FTA took a leadership role in sponsoring and supporting private and public sector initiatives, publications, and symposiums

bringing together the private sector and public sectors in an effort

to break through barriers and break through ideological differences. Included with my written testimony is several success stories of services contracted across the country. Unfortunately, in

6

1993, with the change of Administrations, the rules were changed

and the early consultations that includes the private sector has no

longer been the case.

Some suggest that the competitive contract market has grown

since 1993, which may be true, but unfortunately it grew only in

part due to the passage of ADA and the requirement to, in fact, implement ADA plans from 1992 to 1995. Many public transit agencies chose to do this because of the complications in the variables

and the lack of financial resources. Today, according to FTA statistics through the NTD database, contracted paratransit services

represent 70.8 percent of operating expenses, but only 9.8 percent

of the operating expenses are for motor bus services. If it is good

enough for the disabled and elderly public, I am sure it is good

enough for the general riding public. We are looking to you for the

opportunities to enhance service.

In closing, I come before you on behalf of ATSC and those who

are dependent on transit across America to encourage you to consider our recommendations for enhancing the private sector’s participation while you deliberate on the reauthorization of TEA–21.

I respectfully encourage you to establish those policies that require the inclusion of the private sector to the maximum extent

feasible, again, by repealing Section 5305(e)(3), and mandating that

FTA make a rulemaking requiring private sector participation

guidance; establish tougher and enforceable regulations to prohibit

violation of charter bus regulations and competition by the public

sector using publicly funded capital assets; establish incentive

funding available to agencies that not only show increased ridership, but also show efficiency in delivery of such services. Included

within my testimony are proposals of language that could be included within the reauthorization language which, in fact, accomplishes these goals.

Thank you very much for the honor to speak before you today.

Senator ALLARD. Thank you for your testimony.

We will now move on to Mr. Molofsky.

STATEMENT OF ROBERT MOLOFSKY

GENERAL COUNSEL

AMALGAMATED TRANSIT UNION

Mr. MOLOFSKY. Thank you, Mr. Chairman and Senator Reed.

My name is Robert Molofsky. I am currently General Counsel for

the Amalgamated Transit Union. Over the past two decades, I have

been very involved in various transit privatization studies, forums,

legislative campaigns in more than a dozen States and the provinces of Ontario and British Columbia. In each case, we have

sought, when faced with addressing issues of privatization, to

guard against job losses, protect our members’ collective bargaining

rights, and ensure the delivery of safe and efficient transit services,

consistent with local policies and agreement.

Since 1964, the ATU, and indeed all transportation labor, have

endorsed a longstanding Congressional policy that decisions involving the choice between public and private transit operators should

be left to local authorities who are better equipped to make local

transportation decisions. The Federal Government is clearly best

suited to making broad public policy decisions rather than microVerDate 11-MAY-2000 07:57 Aug 12, 2004 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 95184.TXT SBANK4 PsN: SBANK4
7

managing the local transit choices selected to meet the needs of

rural, urban, and suburban communities.

From the start of this debate to the present, we have always believed that the role of the Federal Government should be one of

neutrality and it should not intrude on local decisionmaking. If the

private sector has an ability to provide safe and effective service at

savings to the communities, then they should be offered the opportunity to provide their proposals for consideration by the MPO.

That is the policy today, and we do not think it should change.

In the past in this regard, much has been made of the statutory

references to involving the private sector, to the maximum extent

feasible, when designing local and regional transit systems. Yet

Congressional intent, dating back to the first highway transit bill

in 1964, indicates that private enterprise participation sections of

the surface transportation law were designed to protect only thenexisting private providers, rather than any future private-sector

operations.

Nevertheless, ATU has never been opposed to the provision of

transit services by private operators, so long as the methodology

and criteria for service section and final decisions are left to local

decisionmakers, consistent with applicable laws, collective bargaining agreements, and other pertinent arrangements. Without

question, the participation of private enterprise in the Nation’s

transit sector is essential to the health and success of the industry,

and we recognize today the emerging role played by taxi and small

van operations in providing paratransit service, especially to meet

the needs of the seniors, rural residents, and those on Medicare.

America’s transportation needs cannot be met by one mode alone,

as you stated, and we agree. And they certainly cannot be met by

only one sector of such mode. In fact, as noted earlier, we do represent both public and private operators.

For purposes of our discussion, it is important to define the term

‘‘privatization.’’ In the area of public transportation, the term has

been used to refer to various programs, including those that provide for competitive bidding, tendering, contracting-out of existing

new or restructured transit service. The role of the private sector

in these situations may involve entire operations or portions. Similarly, the discussion of privatization can raise different issues, depending on whether such plans involve fixed-route bus service,

ADA, paratransit, or specialized transit services. The most controversial aspect, of course, involves the contracting-out of sections

of route segments or portions of existing systems and denying

those operations the opportunity to address new or emerging transit needs.

With respect to transit labor, two common elements through all

of the variations discussed above exist. First, we always strive to

protect the jobs of our members and second, to ensure that any potential cost savings are properly measured and weighed against the

potential adverse effects on safety and service. It has been our experience that mandated privatization through competitive bidding

has served to reduce the standard of living for workers, diminish

the transportation service provided in communities and, as I shall

discuss, transit privatization has been based on questionable and

at times false assumptions regarding competition cost and the

8

mechanisms used to calculate these and other matters. We believe

that the primary goal of Federal surface transportation policy

should be to improve the speed, safety, and convenience of travel

while increasing transit ridership.

Privatization, however, confuses the efficiency and effectiveness

of transportation systems with lowering costs on individual routes.

One result is that privatization advocates typically omit from their

competitive cost analysis the necessary cost of increased supervision and coordination which a privatized route-focused approach

requires.

Moreover, the underlying premise of transit privatization plans,

that private companies can reduce the cost of service delivery and

provide a chance for locally owned transportation to find business

has been proven unfounded in an industry in which little competition exists, and we have a lengthy discussion of actually the situation in Denver included in our testimony.

Further, I would like to note that recent studies by the Transportation Research Board and the GAO have documented that Section

13(c), Employee Protective Arrangements, are not a factor in decisions to contract-out. With regard to these labor protections, it

should be noted that these studies have dispelled the myth and

clearly substantiate the ATU’s policy that it does not unduly restrict the ability of transit providers to contract-out.

Today, more than one-third of the agencies contract-out 25 percent of their service. Most significantly, the TRB report indicates

neither the general managers that currently contract-out, nor those

that do not, identified 13(c) as influencing their decisions.

In 1991, with ISTEA, language was included to address privatization abuses which were foisted on the public agencies beginning

in the early 1980’s into the early 1990’s. As a result, language was

included in that bill that stated that the Federal Transit Agency

could not withhold certification of the planning programs developed by the MPO’s, based on the local decisions, choices and

method, and means by which they evaluated public versus private

sector choices.

This action led ultimately to the repeal of a series of increasingly

burdensome and complex regulations proffered by the Agency, initially in 1984 and 1987. In rescinding those regulations following

passage of ISTEA, the FTA noted in detail the adverse impact of

those policies requiring the use of the discredited fully allocated

cost methodology to analyze the cost differences, if any, between

public and private sector——

Senator ALLARD. Mr. Molofsky, can you please summarize your

comments.

Mr. MOLOFSKY. It often led to exaggerated and unwise decisionmaking where properties thought that they would save money

which, in fact, was not the case. We believe that that language

should remain, and we oppose the Administration’s efforts to remove it.

Finally, we have three recommendations that we would like to

state today. First, not only should private operators serve on MPO

boards, but also other transit constituency groups, including transit

labor, pedestrian advocates, bicycles, transit agencies, and others.

We do not believe it is wise, nor fair, that the private operators be

9

given an enhanced role in the decisionmaking of transit services to

the exclusion of other interested parties.

Second, we recommend and have worked with many of our transit employers around the country, both United States and Canada,

using labor management partnerships to address cost and service

issues in light of adverse fiscal developments.

And third, private-sector involvement in transit remains a viable

option in many instances. However, such decisions should be made

on a case-by-case basis after a thorough analysis of the relative

costs and benefits involved.

The bottom line is that Federally controlled privatization initiated in Washington, DC, and forced on local and State Governments, is not in the best interests of either the Nation’s commuters

or its taxpayers.

Thank you very much.

Senator ALLARD. Thank you.

Mr. Pantuso.

STATEMENT OF PETER J. PANTUSO

PRESIDENT AND CHIEF EXECUTIVE OFFICER

AMERICAN BUS ASSOCIATION

Mr. PANTUSO. Thank you very much, Mr. Chairman and Members of the Committee.

The American Bus Association is the trade association of the private, over-the-road bus industry. Our members, which number in

excess of 1,000 motorcoach and tour operators, represent 60 percent of all of the coaches on the road today. They serve over 5,000

communities, and as you stated in your opening statement, they

move 774 million passengers annually, more than the airlines and

more than Amtrak combined.

ABA and its members have only one goal, and that is to ensure

the private bus companies are allowed to compete for business on

a level playing field and contribute to the maximum extent possible

to the transportation network in the country.

ABA’s recommendations require no intrusion on other modes of

transportation and come with a relatively small investment. We

have a unique position as an industry. We are a network of small,

often family run businesses, we are the David up against the Goliath of the airlines, Amtrak, transit agencies nationwide who do

provide critical service, but at a hefty cost to the taxpayer.

Our challenge, which we are asking for your assistance today, is

to weave ourselves into the larger transportation fabric of the public transportation network and defray cost to Government.

We ask you to help us by providing a small investment in our

industry, and very prudent, and targeted programs to ensure a

level playing field. Let me outline a few of these programs.

Intercity bus travel is the only form of public transportation

available to many people, especially in rural areas. The significant

decline in rural transportation and rural bus service has been

reversed in years past because of the existence and the success of

the FTA’s Section 5311(f) program, the rural, over-the-road bus

program, a fund which began under ISTEA and continued under

TEA–21.

10

A study on bus industry subsidies that is appended to my testimony provides evidence and the growth of service under 5311 that

has been spawned. Indeed, Pennsylvania and Colorado have been

leaders in using that program to increase the rural intercity bus

service, but more funds are needed to build upon that success.

Another way to enhance private bus service is to provide a dedicated source of Federal funding and create a network of intermodal

facilities. These facilities could be accessed by all modes of transportation and would provide seamless connections both to intercity

passengers and to local public transportation providers. The Administration’s reauthorization bill establishes an $85-million Federal fund for the development of intermodal facilities to be

used as seed money in a variety of projects, but more monies are

needed.

Service to the elderly and to persons with disabilities is also a

priority for our membership. A 1998 DOT regulation requires that

virtually scheduled intercity scheduled buses, by the year 2012, be

equipped with wheelchair lifts.

Today, all other motorcoaches must provide a lift-equipped bus to a passenger on 48-hours notice. The current $7 million program

that is available and was established under TEA–21 can only equip

200 buses per year out of a nationwide fleet of 40,000, and we need

in excess of 1,000 new lift-equipped coaches annually.

I have appended to my testimony a recent letter from Congressman Jim Langevin to the House T&I Committee leadership in

which he had urged for increased Federal funding to assist our industry with compliance.

ABA also believes that Federal funds should not be used by transit agencies to compete with private bus operators where the private sector is willing and able to provide that service. That is the

law today. The most glaring example before this Committee is the

D.C. Government’s lobbying efforts in support of a bus circulator

that would take tourists around Washington to the monuments, to

sites and to shops, with a first-year cost of nearly $37 million and

in direct competition with three private bus operators who already

run service in and around the downtown and the Mall area.

We have provided specific legislative proposals to the Committee

that would prevent these types of abuses from continuing, and this

is one of our top legislative priorities.

Each day motorcoaches bring tourists, commuters, and shoppers

to the Nation’s cities. And since just one coach with a 24-hour stay

means as much as $11,000 to the economy, it is business that the

communities seek aggressively. However, this service is hindered

by a lack of bus parking facilities and unreasonable rules. A demonstration project to address the parking void in most congested

cities, sharing of parking facilities with transit buses, parking and

planning requirements for MPO’s, and flexibility and idling rules

and research could go a long way to making those trips and those

visits easier.

In conclusion, Mr. Chairman, the ABA and its members again

have one simple goal, and that is to ensure the private bus companies are allowed to compete for business both fairly and on a level

playing field and provide a wide variety of transportation service

options to the traveling public at a reasonable cost.

11

Thank you, Mr. Chairman. We would be very happy to answer

any questions.

Senator ALLARD. Thank you.

Ms. Wilcox.

STATEMENT OF MARGIE WILCOX

CO-CHAIR, PARATRANSIT AND

CONTRACTING STEERING COMMITTEE

TAXICAB, LIMOUSINE, AND PARATRANSIT ASSOCIATION

Ms. WILCOX. Mr. Chairman, thank you for inviting the Taxicab,

Limousine, and Paratransit Association to testify before your Subcommittee. My name is Margie Wilcox, and I am the owner of

Mobile Bay Transportation, located in Mobile, Alabama, and Pensacola Bay Transportation based in Pensacola, Florida.

My companies provide paratransit, airport shuttle, and executive

sedan services. This is my 23rd year in the passenger transportation industry. This year, I also have the pleasure of serving as

co-chair of the Paratransit and Contracting Division of the Taxicab,

Limousine, and Paratransit Association.

TLPA is a nonprofit trade association. We are the national organization that represents the owners of taxis, limousines and airport

shuttles, paratransit, and nonemergency medical fleets. We have

1,000 member companies that operate 124,000 passenger vehicles.

TLPA member companies transport over 2 million passengers each

day, more than 900 million passengers annually.

I am here to speak to you about the role of the private sector and

the provision of public transit services. This country was built on

the principle of competition. A competitive approach utilizes market forces to contain costs, improve quality, and reduce the dependence on a single supplier. For public transit agencies, a competitive

approach to purchasing transit services is a proven tool to assist

in maximizing existing resources and expanding services.

Yet, despite the benefits of competitive contracting, even the consideration of contracting has become an afterthought in the minds

of many officials. A 2001 study by the Transportation Research

Board found that 40 percent of all public transit agencies do not

contract any services, even though there is a legislative requirement to utilize private operators to the maximum extent feasible.

An alarming 30 percent of these transit agencies are led by general

managers who state that they never even consider contracting.

There is an important role for the private operators like myself

to play in providing public transit services. In our written testimony, we list six legislative initiatives. We urge the Senate to include in its transit reauthorization bill. I am going to summarize

our three most important recommendations.

First, the anticompetitive and antiprivate sector planning provision, Section 5305(e)(3) of the Federal Transit Act needs to be repealed. The President’s reauthorization bill, SAFETEA, included

the repeal of this provision by rewriting the planning section of this

Act, thus, eliminating this provision. The law and Congressional intent mandate a role for private operators in planning for public

transit services. Yet, at the same time, this section explicitly prohibits enforcement of the law. We believe that the best path to

more efficient public transportation is to have all stakeholders,

12

such as local officials, consumers, public transit operators, private

transit operators, and labor included in the planning process. We

do not advocate excluding anyone. We urge the Senate to support

repeal of this section.

Second, we request that you require the Departments of Labor

and Transportation to amend their administration of the Federal

Transit Act labor protections. This will make them less of an obstacle to the efficient and effective provision of public transportation

services.

There are four core actions that should be taken as follows:

Number one, it is very often asserted that a change in contractors, resulting from a new company winning a competitive bid,

requires the new contractor to adopt the workers, work rules, and

wage rates of the former contractor. We ask the Senate to address

this carryover of the workforce issue by declaring that a change in

contractors is not an event that gives rise to Section 5333(b)

protections.

Number two is very similar to number one in that we asked the

Senate to make it clear that there is not a required carryover of

workforce in public-to-private transitions, where no employees are

dismissed as a result of a Federal project.

Number three, we asked the Senate to clarify that binding interest arbitration is not a required provision under Section 5333(b)

and that other dispute resolution practices, such as fact-finding,

are acceptable.

And, number four, we ask that you limit the review of the Federal transit grants by Federal Transit Administration, eliminating

the current practice of subjecting FTA grants to review, not only

by DOL, but by private entities, which are the national offices of

the relevant transit labor unions.

Our third legislative initiative is to ask the Senate to direct the

Federal Transit Administration to issue private-sector participation

guidance. There is ample evidence that the private-sector participation guidance developed by the Reagan and Bush Administrations

was a great success. Increasing competitive contracting of public

transit services from $10 million to $500 million per year in the

course of one decade. Since the Clinton Administration rescinded

this private-sector participation guidance in 1994, consideration of

the private sector has stagnated, requiring the FTA to conduct a

rulemaking to reestablish private-sector participation guidance

would result in increasing the efficiency and effectiveness of public

transit operations to the benefit of all transit riders.

Mr. Chairman and Members of the Subcommittee, transit riders

will benefit significantly if our six legislative recommendations are

included in the transit reauthorization legislation.

Thank you again for having me. I appreciate it.

Senator ALLARD. I want to thank you all for your testimony.

I would like to break down my question into two parts. The first

question I would like to direct to Mr. Rosenberg, and Mr. Pantuso

and Ms. Wilcox.

Your testimony indicated that you are supportive of competitive

contracting. Do you believe that competitive contracting will solve

all the cost problems that public transit faces today? If you could

give me some examples of why or why not, I would appreciate it.

13

Mr. Molofsky, the transit labor has been characterized as being

opposed to competitive contracting. Are there circumstances where

such competition might be acceptable to transit labor? It would be

helpful if you could share some anecdotal evidence. Mr. Rosenberg,

you may start off.

Senator SARBANES. Mr. Chairman, before Mr. Rosenberg——

Senator ALLARD. Oh, I am sorry. Do you have an opening statement you would like to make?

Senator SARBANES. Well, I did, but I do not want to intrude into

the questioning. I was going to put it in the record.

Senator ALLARD. Go ahead and make your statement.

Senator SARBANES. All right. Because I have to——

Senator ALLARD. I am sorry. I should have recognized you, and

I apologize for that.

STATEMENT OF SENATOR PAUL S. SARBANES

Senator SARBANES. Mr. Chairman, we welcome the panel. We appreciate their contributions, and we will certainly give careful

study to all of the statements.

I do want to observe, though, that the private sector is currently

involved in many aspects of public transportation. Of course, this

hearing focuses on the one specific way, and that is the provision

of transit services, and I want to say just a few words about that.

Before I do that, I should note that private companies make the

transportation equipment, they engineer, design, and construct the

systems, they develop the properties near the transit stations

which often bring significant economic and environmental benefit

to the community.

We have a very good example of that right here with Metrorail

of public-private partnership and the financing of the New York

Avenue Metro Station which is scheduled to open next year, and

I think is an interesting model to look at.

On the provision of the transit services themselves, the Transportation Research Board, which has been referred to, surveyed

transit agency practices with regard to contracting-out transit services to private or nonprofit providers. They reported, ‘‘Transit contracting is neither rare, nor monolithic in practice. Hundreds of

transit systems of all sizes and types now contract for some transit

services, and many have done so for a number of years.’’

I must say, in my own State of Maryland, there are numerous

private and nonprofit organizations currently providing transit

services around the State, actually in both rural and urban areas.

The TRB study, the Transportation Research Board, also found

that agencies have had varying experiences with contracting-out.

Some have proven to be very effective. Other agencies have cited

concerns about the quality of service and the necessity to closely

oversee. That is what one would expect because obviously there are

going to be, I presume, variations in quality.

The structure we put in place in ISTEA and in TEA–21 allowed

valuable experimentation to take place around the country with regard to the use of private contractors to provide transit services.

There is a lot of flexibility under current law for local officials to

design the mix of publicly and privately provided services that will

best meet local needs.

14

Of course, we need to look at this situation very carefully. There

is an issue here, of course, of where the locus of decisionmaking

will be in terms of local officials and the judgment or will it be

made at the Federal level and simply passed on down the line to

the local level. We have tried to, by and large, provide flexibility

at the local level for making these judgments, but I am prepared

with others to look carefully at that question.

I must say my own perception is that the arrangements we have

established have worked pretty well. That is not to say they are

perfect, but I think they have worked pretty well. I think riders

have benefitted significantly. There has been an enormous increase

in the number of people using a transit for transportation purposes, and I think we need to be certain that that trend continues.

Thank you, Mr. Chairman.

Senator ALLARD. Thank you very much for your statement, Senator Sarbanes.

Do I need to repeat my question?

Mr. Rosenberg.

Mr. ROSENBERG. Thank you, Mr. Chairman. I believe your question was will it solve all of the problems, and the answer is, no.

I think it would be foolish for me to say that by contracting for

service all of the problems will go away in terms of cost control, but

it is one of the very important tools in a general manager’s or a

public agency’s toolbox that needs to be considered. In many agencies, it is not considered.

In Dallas, recently, the contractor, the public board there chose

to eliminate 12 percent of the contracted service in order to retain

4 percent of the workforce because they chose to retain those employees that were employed by the public agency rather than ensure that 12 percent of the riders got service. So it was a decision

to protect workers, rather than to protect riders.

In Santa Clara County, California, the Valley Transportation Authority, currently has decided to eliminate 21 percent of its service

rather than even consider the option of contracting for service. So

many riders will be left stranded without the ability to get to work.

Again, in order to protect public workforces, they chose not to look

at contracting as an option.

So what I would say to you as virtually every State in the United

States looks at the options of reduced funds as a result of the economic conditions and has to consider, and one of the first places

they look at is raiding public transit dollars that as agencies do not

consider this an option, it is really irresponsible on their part.

And there are opportunities for partnerships, as you said, in San

Diego, in Denver, Colorado. Yes, there have been failures, as has

been pointed out, but there have been many successes, and I know

of very few public agencies also that have not had their fair share

of failures and successes. We learn from those. Those are all learning experiences and hopefully we improve, and those challenges get

less and less as we go on.

I would say that the answer in a nutshell is, no. It does not solve

all of the problems, but it is a very important tool, and without

your support, without the Senate’s support in ensuring that there

is a guidance, as was stated by others, it will not happen.

15

And ridership will be reduced and will continue to decline, and

it will result in people being left without those necessary services.

Whether it be the frail elderly, the disabled, and the people that

are very transit dependent because general managers across the

country, as was stated, over 30 percent have not even considered

contracting, according to the TRB study, as an option, and it is a

very important tool in the toolbox.

Senator ALLARD. Mr. Molofsky, do you want to give us your view

as to whether competition would be acceptable in some instances?

Mr. MOLOFSKY. Yes, but before I do, I think I would question

whether the decisions made in Dallas or Santa Clara or elsewhere,

with respect to choices of service, and savings, and transfer of work

from public to private or vice versa should be the subject of oversight by the Federal Government; those are local decisions that

should be respected, and that in fact is the policy that we have always taken, that the decisions, as Senator Sarbanes and others

have said, and as the Congress has repeatedly affirmed, and as

was true when the Act was first legislated, that the choice between

public and private operators is for the local communities to decide.

In terms of the standards by which such competitive bidding

might take place, I would underscore that our position is that we

are not opposed to competitive bidding. The question is what standards are applied, what policies are adhered to, why is it being

considered, who is initiating it and whether it is either forced or

imposed, rather than the subject of a local decision.

The problem we faced in many communities in the 1980’s was

that the Federal Government, FTA was imposing a discredited,

fully allocated cost economic system onto the properties and threatening, and there were examples, rather, of cases where FTA leveraged its ability with respect to the distribution of funds to compel

certain decisionmaking that might not otherwise have taken place.

We have a debate ongoing, and with respect to the city of Denver

and its contracting-out. It was one of the earliest experiments in

1988 and 1989. When it was designed, it was intended to reflect

the best opportunities for the private sector to provide service.

You had mandates of 25, and as you noted, it went up to 35 percent, and in doing so, the State legislature required that that 35

percent be representative of all types of service in the community.

Yet the history shows that several of the assumptions underlying

competition did not maintain themselves in the city of Denver. You

had a shrinkage with respect to the number of competitors. So you

had a loss, not a gain, of competition.

There have been economic studies that have shown that the city

experienced cost increases and not decreases. We are not saying it

was right or wrong. We think that the community should be allowed, free from any Federal role, to have the flexibility to make

its own choices based on its own policies and criteria. The bill currently allows for that, and we do not see it as a problem requiring

any modification.

Senator ALLARD. Mr. Pantuso and Ms. Wilcox, would you respond, please.

Mr. PANTUSO. Mr. Chairman, in direct answer to your question,

I am sure the competition does not solve all of the problems, but

16

I answer in response to the members that we have at ABA and the

type of businesses that they operate.

Most of our members in the motorcoach industry are small family businesses. They have sometimes five or ten buses, but many

times, they have only one, two, or three buses. They are very small

business people. For them, competition and the ability to be at the

table and participate, whether it is for a charter contract or for a

wedding contract, a very small move for most people, but for them

it is their life blood. They have gone through 2 years of depressed

sales. After September 11, we saw business go down as much as

10 percent in the year 2002, and again probably another 10 percent

this year.

And while competition may be incremental in the scope of things

or in the scope of other publically funded systems, to our members

having that extra day or extra 2 days or 3 days of bus movements

can mean the bus payment and their survival at the end of the

month.

Senator ALLARD. Ms. Wilcox.

Ms. WILCOX. Mr. Chairman, I think it would not solve all, but

perhaps some of the problems. And when you have some of the cost

problems monumental in scope that seem to be growing across the

United States with transit costs, I think that the more people you

have, you invite to help you work on the problem, the more chances

of success in solving it.

So with the invitation and having the participation of private operators like myself that sometimes work with limited resources, we

can be more much more creative in solving some of the needs of

the passengers.

Senator ALLARD. Would you agree that we could summarize all

of this by saying that none of you really disagree that competitive

contracting of public transportation can be cost-effective in some

situations and State and local entities should be given the choice

as to whether or not to engage in competitive contracting without

Federal disincentives. I think everybody would agree with that at

the table?

Ms. WILCOX. Yes, sir.

Mr. MOLOFSKY. I think that is the situation today. The question

is whether ‘‘should’’ means that you might require that service be

competitively bid. I think the decision in the first place should be

one of local community determination.

Senator ALLARD. Yes. We just want to make sure that they have

that opportunity to do contract bidding. Everybody agrees on that,

including you, Mr. Molofsky; is that right?

Mr. MOLOFSKY. I do not understand if that means that you are

suggesting that there is language in the statute today that needs

modification. There is sufficient flexibility today to empower the

local communities to make those choices free from any Federal intrusion or imposed standards.

Senator ALLARD. Let me go on to Senator Reed.

Senator REED. Thank you very much, Mr. Chairman.

And thank you for your testimony. It strikes me that one of the

dilemmas that we all wrestle with, but more precisely that local

transit agencies wrestle with is that the nature of public transit is

that the system has aspects that are not economical. Indeed, that

17

is why it has to be a public system, but they have other services

and other routes where you can make a profit. And transit systems

have to make judgments about how they fund their overall operations, and sometimes I would think localities would decide, well,

we could contract this out, and that positive revenue could be applied in other parts of the system.

To make a long story short, and this is a long story short, I think

that is one reason, frankly, that we have made these decisions local

decisions because of, one, the complexity inherent in transit planning, and, two, the different communities around the country.

The other aspect I would say about the localities is that by my

rough estimates the Federal Government contributes about 47 percent of capital to transit systems, and after the TEA–21 Act, we

eliminated operating subsidies for cities or communities over

200,000. So essentially, it is the local nickel we are talking about

more than the Federal nickel. And in that case, too, I think that

argues for a local response rather than a Federal scheme.

Looking at the language of the 5305(e)(3), it essentially says that

the Secretary may not impose his or her criteria upon the local

community when it comes to privatization, and I think that is consistent with both the nature of the issue and also the funding that

we have seen.

But what I think this whole discussion has raised to the forefront

is the issue of who makes the decision, local or Federal. But let me

just go to some specific issues that have come up in the testimony.

In terms of the planning organization, the MPO, Mr. Rosenberg,

you are suggesting that there be participation by private entities.

Would you also agree, and I think you heard other panel members

say, that environmental, labor, and other types of groups should be

represented also?

Mr. ROSENBERG. I believe that every interested party should be

at the table. As someone who participated back in the early 1980’s

as the Chairman of the Los Angeles County private sector forum

for many years, we saw a tremendous number of opportunities

come as a result of all parties being at the table and having the

opportunity to communicate and to talk about the issues. Many

contract opportunities came as a result of that, and many possible

failures were prevented by having all of the appropriate parties at

the table.

So, I think it is critical that, particularly representing ATSC and

the private sector, that the private sector be at the table and that

all interested parties be there for communication.

Senator REED. So, you would not object if there was a directive

legislatively for private operators, that it also should include other

groups specifically. You would not object to that.

Mr. ROSENBERG. I would not object. I think you would have to

review it to see what groups would be participating at the table,

but I do strongly support the idea of having the private sector at

the table.

Senator REED. And, Mr. Molofsky, I think you obviously stated

that going forward.

Mr. MOLOFSKY. Yes.

Senator REED. One of the other issues that comes up, and again

this gets into the local nature of the decision of at least the current

18

law is that, as you point out in your testimony, one of the thoughts

behind the original proposal for privatization was that many local

forums would participate, like Mr. Pantuso’s family organizations,

family companies. It seems that in many cases, these are really regional or national groups that are really taking up the privatization challenge and being awarded a contract. Is that an accurate

assessment?

Mr. MOLOFSKY. Yes, I think it is. What we have found when we

have looked at the history behind most of these cases, it is advanced as if there is this pure economic theory that pure competition will exist and that you will have a half-a-dozen, a dozen, or

more private operators submitting bids, and you will evaluate

them. But in practice it does not work that way. We have had over

time an experience where, if not with the first bid, certainly thereafter that there is a consolidation of operations.

In Denver, for example, a number of the companies that were involved in the beginning bought each other out, and so you had a

sharp reduction in competitors.

Most recently, the national companies, I should say international

companies that have been involved, have principally been organizations based in the United Kingdom and Canada. There has been

a recent history of acquisitions where Ryder has purchased ATE

and National Express in the United Kingdom, and has purchased

ATC and the other major competitor. Coach USA has also been acquired by Stagecoach, which is another United Kingdom property.

So, you have a massive consolidation of private operations, that

is, with respect to fixed-route service. I would agree that there is

a multitude of private operators out there in the paratransit field

and certainly in the taxi area, but that is not the experience in

terms of regular transit operations.

Senator REED. Which raises another question, if I may, just for

Mr. Pantuso and Ms. Wilcox. The nature of your, and I do not

know the nature of business as well as you do, Mr. Pantuso, but

the nature is not fixed-routes, but specialized services that would

complement a basic transit system; is that a fair description?

Mr. PANTUSO. It is a combination, Senator. All of the major fixedroute carriers in the country, and there are about 100, belong to

our association. They actually belong to another group that we

manage called the National Bus Traffic Association. It is a clearinghouse for the fixed-route carriers. There are few nationwide

companies other than Greyhound, and we have also got large regional carriers and a lot of smaller ‘‘mom-and-pop’’ carriers.

Senator REED. But in numbers, the bulk of your members are,

as you describe them, the family businesses with five, six, three,

or four buses whatever.

Mr. PANTUSO. Absolutely. Only two carriers are publicly held

companies. And to go back to Mr. Molofsky’s example, there is a

lot of change going on in the industry right now, and even some

of the biggest companies are going through divestiture. Coach USA,

which has Bonanza, and Patuxent in Rhode Island and other companies along the East Coast are going through the process now of

dividing those companies back up into smaller regional carriers.

Mr. ROSENBERG. Thank you.

19

Ms. Wilcox, it is the same basic question. Your members would

not be prepared to assume the full range of transit services that

most transit agencies have—fixed bus routes and things like that—

but you are really competing about selected aspects, paratransit, elderly transit, et cetera; is that fair?

Ms. WILCOX. Well, that does make the bulk, taxicabs and small

companies like myself, which I am regional, even though I am a

small, single company. I own Mobile Bay and then I am also in

Florida. So when we get into large regional, I could be considered

regional, but I am very small. And then we have the range of services of the nonemergency fleets, taxis, and van service. And then

we also have some members that do own motor coaches. So there

is a large range of the services that are private and membership

could provide.

Senator REED. But it strikes me, again, subject to your comments, that you would complement basic services of a fixed-route

transit system, the bus system——

Ms. WILCOX. An example in, I guess it was Phoenix that when

they were considering stopping their Sunday service, instead of

ceasing the Sunday services, they decided to go to a demand response so that the people that did need Sunday service still had it

available to them.

So there are a lot of times when companies and services like myself make good sense to the passengers.

Senator REED. I assume that that decision was made in Phoenix

because they sensed a local need, and they carried it out.

Ms. WILCOX. Exactly.

Senator REED. Thank you.

Thank you, Mr. Chairman.

Senator ALLARD. Thank you.

Mr. MOLOFSKY. And I would note that 13(c) was not a hindrance,

and I do not want the comments about 13(c) to go unaddressed, to

the extent that there is a significant amount of contracting at the

same time as the employee protections are properly factored into

the decisionmaking.

Senator ALLARD. We will go ahead and move on. Right now, I

would like to address this question to Ms. Wilcox of the TLPA, and

then I will give all of the other witnesses that may care to respond

the chance to do so.

Right now, transit law already calls for recipients to, and I pulled

this right out of the law, encourage, ‘‘to the maximum extent feasible, the participation of private enterprise.’’

Do you believe that this is the case? And are there specific examples where this requirement is not being followed that you may be

aware of?

Mr. PANTUSO. I am sorry. Repeat the question, please.

Senator ALLARD. Currently transit law calls for recipients to encourage to the maximum extent feasible, participation of private

enterprise. In other words, they want you to seek out every possible way you can to include private enterprise. Do you believe that

this is the case for recipients of Federal grants and are there specific examples where this requirement is not being followed?

20

Mr. PANTUSO. I think there are some areas that they do encourage private involvement, but no, I do not think that to the maximum extent feasible private companies are included.

Senator ALLARD. Would anyone else care to respond?

Mr. MOLOFSKY. Yes. When that language was included in the

legislation beginning in 1964 there was discussion on the floor of

the U.S. Congress regarding its intent and purposes. Senator Williams, in his remarks with respect to the language that you have

just quoted involving the private sector to the maximum extent feasible, noted and emphasized that the aim of that provision was to

assure fair and equitable treatment for private operators that were

providing service at the time the statute was enacted. In a broader

context Senator Williams made it clear local decision makers and

not the Federal Government would decide case-by-case whether

mass transit services should be provided public or private.

Senator ALLARD. The question is, do you believe that they are encouraging the participation of private enterprise to the maximum

extent feasible?

Mr. MOLOFSKY. I think the statute today is reflective of Congressional intent and that the communities today have the flexibility

to make choices that are in their best interest.

Senator ALLARD. We can tell who the attorney is at the table, he

cannot answer a question.

[Laughter.]

Mr. Rosenberg.

Mr. ROSENBERG. I am just a former bus driver, so let me see if

I can answer that question, Mr. Chairman. I think as I said earlier,

I do not believe it is occurring. I think if you look at Santa Clara

as an example, as I stated before, or you look at Dallas, you look,

it is happening in Birmingham. My own experience in Thousand

Palms, California, where the agency went through a bidding process and at the end chose to simply take it back in house and now

the general manager is under close scrutiny for a number of issues

including improper use of Federal funds. Sacramento RTD, where

recently the RT chose to take away a privately operated service

using Federal public funds to take over a commuter service at

much higher cost, the Los Angeles County Metropolitan Transportation Agency—do I need to say any more—at the cost of over $100

per hour. Several studies have been demonstrated that they could

reduce their cost simply by keeping all of their labor agreements

in place, and just transferring service to a private operator to be

operated at a savings of more than $25 per hour. That is simply

not wages and benefits savings. That is just efficiency savings.

And the fact that the TRB study says that 30 percent of GM’s

have not even considered contracting, and that 40 percent of agencies across the country that are Federal recipients do not contract.

Clearly without a guidance, it is not being used to the maximum

extent feasible. So, I think the answer is clearly no, it is not being

done in cases where it should be.

Senator ALLARD. Mr. Pantuso.

Mr. PANTUSO. Mr. Chairman, for the over-the-road industry, the

motorcoach industry, I think what we see more often is not an

issue of whether we are included or not, it is whether the willing

and able rules or the charter rules are enforced so that we can

21

participate in the process, so that we know when business opportunities are available, so that we can provide services when

appropriate.

Senator ALLARD. Ms. Wilcox, I have another question. Private

sector companies such as your members, already operate over

three-quarters of all paratransit service provided by public transportation agencies. There must be some good reasons why so much

paratransit service is provided under contract. What do you think

are the main reasons why transit agencies contract so much for

services such as those which your membership provides?

Ms. WILCOX. If you would permit me to be so bold, I think it is

because we do a very good job, and that when you get down to a

specialized service such as paratransit, you have really got to be attuned to the customers’ needs. And it is not that the transit industry is not attuned to their needs, but for example, last month one

of our dialysis clinics was going to shut down for renovation. Fourteen or so of the passengers in one of the cities that I do business

in were going to be located outside of the guidelines of the transit

bus system, so therefore their ADA service would cease. Well, upon

hearing that from one of the call takers, I immediately contacted

the general manager. We identified which customers that would affect. We contacted the mayor, and we worked together to provide

a solution for those 14, 15 passengers that otherwise were going to

miss some of their life-sustaining treatment, or perhaps have a

scattered approach to getting there.

So, I think that when you are a small business, you are close to

it. I answer the telephone. I think the specialized paratransit services, that is the reason why it has been so successful. We are very

close to it.

Mr. ROSENBERG. Senator Allard, if I could add? I think that the

reason, because we do a lot of that as well, is that they looked to

us when ADA was implemented for the expertise, for the ability to

control cost, to get the flexibility and responsiveness. And I also

think that there was an incentive provided. The fact that public

transit agencies could capitalize their paratransit cost and the

maintenance cost and leasing of vehicles, that gave them the incentive that was needed in order to look at contracting as an option

because those were costs that could be covered by what they may

have felt was a mandate that was not funded.

Being able to capitalize that, the incentive that was provided,

such as the incentives that we talked about earlier in terms of ridership and efficiency, that is what has promulgated them to look

at that. There were a lot of variables, and they had to act very

quickly.

Just to give you two examples, I know where we operate and

where I had supervised service in Orange County, California, when

I was VP of Operations, and we continue it in Las Vegas. We operated combined between those two over 110,000 trips a month ADA

service. In both cases we helped the agencies achieve 0 percent denial. That talks to the expertise, and I am sure that you know of

many cases across the country where people are alleging civil

rights violations as a result of public transit agencies being unable

to meet the denial expectation of the regulations relevant the ADA.

We in the private sector are helping them to achieve that.

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Senator ALLARD. Senator Reed.

Senator REED. Thank you, Mr. Chairman. I think the last round

of questions was illustrative to me. It seems, at least in the issue

of paratransit services, there is maximum feasible private participation. That is what you said, Ms. Wilcox. That is what you said,

Mr. Rosenberg. This issue of maximum feasible participation, I

think it is one probably relative to what service you are talking

about. I do not think anyone here would necessarily jump up, certainly taxicabs or the intercity buses and say, we want to run a

subway system or we can run a subway system, and that is a transit system.

Really, the right issue here in terms of feasibility is, do the people that are authorized by law think it is feasible and can they defend that to their passengers and everyone else.

I think also, just a comment about these labor protections. I

think the notion that we would deny people the protection of a contract that they have entered into, a labor contract, simply on the

change of management, that they would lose their benefits because

of the change of management, to me is unduly harsh. I mean they

are there in good faith. They bargained for this. They are working.

Just because the ownership has changed, they lose those protections, would be, I think unfortunate.

Just those comments, Mr. Chairman. Thank you.

Senator ALLARD. Thank you.

I have some more questions. Mr. Rosenberg, over three quarters

of paratransit service is competitively contracted and only about 10

percent of fixed-route bus service is provided by private companies.

Would you comment on why such a disparity exists?

Also, in answer to the question—and this would be for all the

members of the panel—are there different barriers to contracting

for different modes of transportation, or are the barriers basically

the same across all modes? Mr. Rosenberg.

Mr. ROSENBERG. Well, I think, as I stated in my initial testimony, I think there are attitudinal and policy barriers. There is

also the lack of incentives for fixed-route services to be contracted.

I think without some type of policy guidance, it does not occur. Ten

percent of the fixed service to be contracted, with such a significant

cut going across the country, and the economic conditions, just

again seems irresponsible. I think that we both are trying through

our associations. I know all of our associations make the attempt

to try and change some of the attitudinal barriers.

Just yesterday I had the privilege of moderating a panel before

the APTA Board members. The Board member who is the Chairman from CARTA, Mr. Patterson Smith, stood up and said, ‘‘I am

talking to the Board members now, not the staff,’’ to try and make

sure that the message could get across that it is the Board members that set the policy, and often those opportunities are not presented to them on a local level. The general managers do not do

that, and they are not given the incentive and guidance.

I think in order to encourage that again, I am not just saying

here that you do it through a policy, that is not what we are saying. A policy is just one aspect. I think that you have to provide

incentives. You cannot just give incentives as proposed within

SAFETEA, with all due respect to the Administration’s proposal

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that says, we reward you for ridership increase year over year, because that is just taking good money and throwing it after bad. You

have got to make sure that people are efficient. Say, show us that

you are going to be efficient in increasing ridership. We want increased ridership. We want more people in the seats. But let us see

how we can extend that dollar and stretch it because we have

many people out there that are very dependent on transit. Again,

the examples that I gave you where people are not considering it,

it would just seem irresponsible when you have to cut service to

someone who has to get to their doctor or they have to get to their

work, and they have no other option but transit, you are going to

cut it simply in terms of looking at the workers.

I want to respond that this again, as I said before, is not an issue

or whether it is labor versus nonlabor. We have many labor agreements. Typically, in all of our fixed-route operations, there is either

an agreement with the Teamsters, ATU, the Transportation Workers Union, or SEIU. Many of our paratransit operations are unionized. Why are some not? Because in many cases they may, in rural

areas or suburban areas, have just 3, 4, or 10 drivers. It is not even

cost effective and economical for labor to go in there, and they do

not go in there to try and set up a labor agreement to protect those

3, 4 or 10 employees. This is not about trying to reduce wages or

reduce benefits or not protect the collective bargaining process.

This is simply about trying to stretch the dollar, and I think that

the reason that 10 percent are not contracted is that traditionally,

those fixed-route general managers have been very protective of

those fiefdoms for many, many years, and are reluctant to look at

that as an option within their toolbox even though it exists. They

were mandated to look at ADA paratransit. They had to respond

quickly. They had to do it as cost effectively as possible, and you

gave them the incentive to do it through providing that capital

funding for the contracting of services.

Senator ALLARD. Mr. Pantuso.

Mr. PANTUSO. Mr. Chairman, I would just say that from our experience, from our members’ experience, the opportunities do exist

but they exist differently on a location-by-location basis. I can tell

you in the State of Maryland, for example, there are tremendous

opportunities for local private companies to be engaged in moving

people, primarily in doing commuter work from suburban Maryland into DC. There are probably 7,500–10,000 individuals that

commute on private coaches every single day into Washington, DC,

taking 5,000 or more cars off the highways, reducing air emissions,

and congestion.

But at the same time, the example that I gave in my testimony,

in downtown DC, WMATA wants to initiate the circulator system

and create a new bus system, putting 80 new vehicles on the mall

area, when we already have three companies that already provide

this service, it seems unconscionable to me. So it is on a locationby-location basis.

Senator ALLARD. Ms. Wilcox, and then Mr. Molofsky.

Ms. WILCOX. Mr. Chairman, I think there are barriers even in

paratransit. I guess the first example that comes to my mind is my

own personal 13(c) experience in my Pensacola, Florida location. I

was awarded the contract on an emergency basis. When we were

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in a dispute with the union, I was given a call basically from the

manager saying that due to the grants being held up or possibly

being held up by the people that review that, and I understood that

to be the union, that possibly the funding for the entire transit system in Pensacola would be halted. They would not receive any of

the monies, not only just the monies to fund the ADA service. So

there was somewhat of a leverage used to get me to conform to

what they wanted, so I think that was a major barrier, and that

was not really one of—the $13,000 I spent on attorney fees was not

a part of my budgeted bid.

Senator ALLARD. That was a decision made here in Washington

by the Department of Labor as opposed to a local decision?

Ms. WILCOX. Yes, sir.

Senator ALLARD. Mr. Molofsky.

Mr. MOLOFSKY. I would suggest that the description of the history involving that grant is at best incomplete and somewhat exaggerated from the full story’s facts. Under the current system with

respect to 13(c), no grant can be held up by the labor unions or

anybody else. They have to be issued and released within 60 days

of their filing at the Department of Labor, no matter what the underlying issues are. That grant ultimately was. There were some

complex issues involving the transfer of employees and work from

one contractor to another, and questions arose about the existing

labor agreement. But to characterize that experience as one where

the unions were exercising undue leverage I think is not true. To

characterize that as the unions potentially taking a position that

would deny funds to the city of Pensacola is not true. And to suggest that funds with regard to any issue raised in connection with

a pending 13(c) grant could result in the withholding of Federal

funds is just not the case. The regs do not permit it. We do not

seek it.

I would just suggest that if the Committee is more fully interested in that history and circumstance, we can provide a full accounting of that case.

Senator ALLARD. Mr. Molofsky, that is a decision that was made

here in Washington, and you testified earlier that you support local

decisionmaking. Do you not find that contradictory?

Mr. MOLOFSKY. The decision to release the funds to Pensacola by

the Federal Transit Administration was done in the normal course

of its grant proceedings.

Senator ALLARD. That is true, but it is a standard that was imposed here in Washington and its rules and regulations are forced

as a condition of the grant, and that takes away local decisionmaking. Obviously, they worked it out locally, and then it was delayed here in Washington. Do you think that is appropriate?

Mr. MOLOFSKY. First of all, it was not delayed, and second, we

were working based on the local facts and circumstances to try and

resolve that issue. It was not an imposed determination from

Washington. It was reflective of trying to ensure the rights of the

employees in order to allow the grant funds to be spent wisely.

Senator ALLARD. I do not want to get into 13(c) in this hearing,

but we have had hearings in the past on 13(c), and we have had

a number of witnesses in the past come and complain about how

13(c) was applied, how it took precedent over local decisionmaking,

25

and how local contracts, once they were agreed to, could not be applied. So, I guess my feeling is that it does stifle innovation, and

I guess you do not have that view, and that is understandable. The

other members of the panel want to discuss whether or not they

think this stifles innovation.

Mr. MOLOFSKY. Our view is that 13(c) does not stifle innovation,

but let me amplify that if I may.

Senator ALLARD. Okay.

Mr. MOLOFSKY. The history of transit in the United States over

the last 100 years has reflected innovation and technological

change and innovation with respect to service providers and the

equipment, method, and means by which the service is provided.

The ATU has supported every major change in modernizing the

industry, in changing the equipment, and advancing from more

modern buses to bus rail. We have supported expansion of paratransit services and supported the implementation of improved devices and safety mechanisms to ensure the better transport of our

communities’ passengers. Transit labor has taken the lead in each

and every one of these areas for more than 100 years, and I think

what has been sought and what was sought many years ago under

13(c) was to make sure that the employees that were providing

that service had their jobs protected and their collective bargaining

rights maintained as part of Federal policy.

Senator ALLARD. Even at the risk of undoing a local agreement?

Mr. MOLOFSKY. I do not believe the history even reflects that.

Senator ALLARD. I see, Okay.

Senator REED. Mr. Chairman.

Senator ALLARD. Let me have Ms. Wilcox, Mr. Pantuso, Mr.

Rosenberg respond, and then I will call on you.

Senator REED. If I may make one comment? The General Accounting Office has studied this issue, releasing a report which

finds that most transit agencies report impacts are minimal. I

would suggest that we get a copy of the report for the record and

include it in the record.

Senator ALLARD. Without objection.

Mr. Rosenberg, Mr. Pantuso, Ms. Wilcox, do any of you have any

comments in this regard?

Mr. ROSENBERG. I think as you said, Mr. Chairman, you do not

want to turn it into a 13(c) hearing, but I will say that I think

where general managers are looking for reasons to create barriers,

13(c) is commonly the excuse that is provided in order to prevent

the opportunity for contracting. It has been used as a barrier. The

fact that it is reviewed by DOL does seem inappropriate considering that it is a transportation issue, and I am not aware of other

situations where that does occur, so again, I would say that it has

been a barrier. Whether perceived or actual, it certainly is a barrier and has been used in many cases. Pensacola is one example.

We have heard many operators say and general managers say,

well, the reason we do not contract or we do not consider it is because of the 13(c) issues and implications.

I am also not aware where a contract has been transferred,

either between contractors or between public agencies, where there

has been any significant loss of jobs. It is generally, if you look at

Foothill Transit in Los Angeles County, California, or the fact that

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MTA took and contracted some lines some years ago, the employment, what happened is people are given jobs, and jobs are retained through attrition. Jobs are not lost. New jobs are actually

created by the private sector and new people are employed in the

transit industry.

Senator ALLARD. Mr. Pantuso, did you have any comments?

Mr. PANTUSO. No, Senator.

Senator ALLARD. Ms. Wilcox, any further comments?

Ms. WILCOX. I do personally believe that it is an impediment. I

do own a business. It has been an impediment to me personally.

On the other side of the protection issues, 6 years severance pay,

if I happen to lose a contract, I cannot even calculate that type of

arrangement. I do not know of anybody else in the United States

that has a 6-year severance package. So to say that that is not an

impact or it does not keep small operators like myself from even

bidding on a contract such as that, I think that is not a correct

statement.

Mr. MOLOFSKY. I would note that the TRB report alluded to earlier, when general managers were asked about why they may

choose not to contract, referenced an absence of control, questions

about cost savings, the lack of qualified firms, and some difficulties

with service, safety, and maintenance issues. 13(c) was a distant

seventh or eighth, and I believe the report reflected the expert

views of a dozen or more individuals selected through a Congressionally mandated study, and I think it speaks for itself.

Senator ALLARD. Mr. Molofsky, would you agree though that the

provisions in 13(c) as stated by Ms. Wilcox, mean that transit

workers must receive 6 years of severance pay if they are laid off?

Would you agree that that provision is in there?

Mr. MOLOFSKY. The purpose of 13(c)——

Senator ALLARD. No, no. Just answer the question, is it in there?

Is that a provision?

Mr. MOLOFSKY. Yes. I will say to you though that——

Senator ALLARD. I know there are arguments for it, but I just

wanted to make sure——

Mr. MOLOFSKY. No, no, no, no. The facts will show that the existence of that provision along with the other guarantees that Congress has agreed to for over 40 years, has served to impact the way

service is designed to make sure that the employees’ rights and interests are not jeopardized and that jobs are maintained, either

through attrition or other restructuring and education. It has been

very rare—the amount of payments that have been distributed

under the 13(c) program pales—it is less than 1 percent of the total

transit dollars that have ever flowed from the program since it

started, and to rely on that as an argument, I think again reflects

an exaggerated view of the facts.

Senator ALLARD. I have one final question and then I’ll see if you

have, Senator Reed, any questions.

At a recent hearing by the full Committee, we heard a comparison between San Diego and San Jose, that suggested that introducing competition to local planning can make major strides to

improve both efficiency and effectiveness of transit. Since San

Diego seems to have been able to produce these improvements

under the current Federal law, it would appear that other areas

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could do so as well. Are there any barriers in the current Federal

program which we could reduce or remove to make it more likely

that other areas would adopt San Diego’s successful practices?

What local barriers might exist that should be eliminated?

Mr. ROSENBERG. Mr. Chairman, if you assume, if I understand

your question correctly, you are asking if any barriers currently

exist that prevent them from doing it. I suppose that again, those

barriers we have talked about, 13(c), the lack of a guidance, the

lack of enforcement of the check-off in triennial reviews, I think

those provide for a disincentive to San Jose to do the right thing

and ensure that service is protected for their riders. I mean San

Diego is considered one of the most efficient operations in the country, and as I think you pointed out, almost 50 percent of that service is contracted. Laidlaw operates a significant portion of that

service in San Diego. We are quite proud of being a partner with

San Diego, the MTDB down there, Metropolitan Transportation

Development Board, in delivering quality service and being part of

one of the most efficient transportation services in the country, constantly recognized by APTA and its peers. So, I would say that

what we are looking to you again for, as we discussed, some of

those barriers need to be eliminated. The repeal of 5305(e)(3), a

guidance, the direction to FTA to provide a guidance so that they

will be encouraged, and provide incentives. Show San Jose, not

only are we asking you to look at contracting as an option, but if

you are also more efficient, we are going to help you with your

problem. We are going to give you dollars. There is going to be dollars available to help you because you are also more efficient, to

help you deliver ridership, to help to meet your needs.

So by doing those things I think that you can accomplish it.

Senator ALLARD. Senator Reed.

Senator REED. I am fine, Mr. Chairman.

Senator ALLARD. Finished?

Senator REED. Yes, sir

Senator ALLARD. Okay. We will keep the record open for 10 days

for Members to submit questions. We would appreciate it very

much if you would respond to questions that are passed on to members of this panel in a prompt manner back to the Committee.

The Committee has heard a number of good issues today, and we

plan to follow up on all of the comments that were made. We appreciate you taking the time to be here. It is not always easy to

get away from your job and your businesses to be here, and we do

appreciate it.

Thank you very much. The hearing is adjourned.

[Whereupon, at 4:11 p.m., the hearing was adjourned.]

[Prepared statements and additional material supplied for the

record follows:]

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PREPARED STATEMENT OF SENATOR JON S. CORZINE

Mr. Chairman, thank you for calling this hearing. I welcome the witnesses and

look forward to their testimony.

I appreciate the role that the private sector can play in providing public transportation. Private transit operators very often fill a valuable gap in our transportation

infrastructure by increasing transportation opportunities during rush hours and

providing greater transportation alternatives to low-income workers as well as the

handicapped. In my own State of New Jersey, for example, we have a number of

bus and coach companies that supplement New Jersey Transit efforts to provide sufficient transportation to work centers in New York and Philadelphia.

However, I am concerned about efforts in the Administration’s reauthorization

proposal, SAFETEA, that would mandate private enterprise participation. These

provisions would, among other things, allow the Department of Transportation to

withhold certification if a Metropolitan Planning Organization (MPO) does not sufficiently allow private operators to compete. Such a measure would interfere with the

countless decisions that departments of transportation and MPO’s make regarding

how transit service should be provided.

In addition, Mr. Chairman, for many States such a measure would not be needed.

In my own State of New Jersey, New Jersey Transit has worked out a suitable arrangement with private bus and coach companies: It does not compete with those

companies for any route, the route always goes to the private company. This arrangement was worked out without any Government intervention.

I hope, Mr. Chairman, that the reauthorization of TEA–21 will allow the Federal

Government to remain neutral on the issue of which type of transportation provider

is appropriate for communities. I also hope that Congress will be able to get to work

and produce a reauthorization bill before the current law expires on September 30.

Our States face a severe transportation funding crisis if this does not happen.

—————

PREPARED STATEMENT OF IRWIN ROSENBERG

PRESIDENT, AMERICAN TRANSIT SERVICES COUNCIL

VICE PRESIDENT OF GOVERNMENT RELATIONS

LAIDLAW TRANSIT SERVICES, INC.

JULY 23, 2003

Mr. Chairman, Mr. Ranking Member and honorable Members of the Subcommittee, thank you for allowing me the honor to testify before you today on behalf

of The American Transit Service Council. I am Irwin Rosenberg, President of the

American Transit Service Council, and Vice President of Governmental Relations for

Laidlaw Transit Services, Inc. one of the Nation’s largest providers of contracted

transit services. ATSC members provide contracted services in hundreds of America’s rural, urban, and suburban communities in virtually every State represented

by the distinguished Senators of this Subcommittee.

Although the competitive contracting market has grown over the past two decades, primarily during 1984–1993, it is increasingly evident there continues to be

attitudinal and policy barriers toward the broad use of competitive contracting to

provide public transportation services in the most cost effective and efficient means

possible. According to the Transportation Research Board 2001 report ‘‘Contracting

for Bus and Demand Responsive Transit Services’’, 40 percent of all Federal aid

transit recipients contract for no services. Competitive contracting can be a very effective tool allowing public transit agencies to be more responsive to its customers,

implement effective controls on cost, and most important, improve and assure quality service through establishing enforceable performance standards.

The advantages of competitive contracting include: • The shift of risk. • Reduced cost and cost control. • Increased flexibility and responsiveness. • Financing of capital investment by the private sector allowing the maximizing of

limited funds. • Ability to manage service quality and reward good performance as well as establish financial and equitable penalties for poor performance. • Creates a competitive labor environment allowing the private and public sectors

to negotiate improved work rules and appropriate but fair wages and benefits.

• Allows public sector resources to be appropriately focused on planning and policy

development for systems.

Opponents historically attempt to confuse the issue by suggesting what we are

advocating here is full privatization of public transit services. This is not the case.

We are here to ask you to support legislative language within legislation reauthorVerDate 11-MAY-2000 07:57 Aug 12, 2004 Jkt 000000 PO 00000 Frm 00032 Fmt 6621 Sfmt 6621 95184.TXT SBANK4 PsN: SBANK4
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* Held in Committee files.

izing TEA–21 (SAFETEA) that encourages the inclusion of the private sector to the

maximum extent feasible, rewards efficiency and increased ridership, assures accountability for the expenditures for limited public resources, and provides for the

fair and uniform application of Federal procurement guidelines. Competitive contracting for service based on competition does not eliminate the responsibility of

transit agencies to determine policy, plan service, or assure it is delivered in an efficient and cost effective manner. When services are contracted, public agencies continue to set the standards, hold contractors accountable, retain overall financial responsibility and accountability for public funds, and establish the true cost for delivering service.

Competitive contracting does not mean nonunion. Many of our thousands of employees working for ATSC’s member companies in operations across America are

represented by collective bargaining agreements between our member companies

and The Teamsters, the Amalgamated Transportation Union, The Transportation

and Communication Workers, The Service Employees International Union, and

many other unions. It has been clearly demonstrated and proven competitive contracting is not an attempt to avoid the collective bargaining process nor is it an attempt to save money by simply lowering wages and benefits.

ATSC members and many private companies across America are able to provide

essential capital and extend to their customers the value of their resources and in

depth experience along with national purchasing relationships and innovations to

deliver service more cost effectively and efficiently.

From 1984 until 1993, The Congress and Administration initiated and supported

growth in competitive contracting through legislation and Federal policy that encouraged the use of the private sector to the maximum extent feasible and required

local participation in the planning process, for example early and constant consultation with the private sector by the metropolitan planning organizations. In addition,

the FTA took a leadership role in sponsoring and supporting private/public sector

initiatives, publications, and symposiums bringing together the private sector and

public sectors in an effort to break down barriers and break through ideological differences thus assuring new private/public sector partnerships were created and successfully implemented. Included with my written testimony are several success

stories of services contracted across the country, some in communities of States you

represent that demonstrate competitive contracting for service works!*

Unfortunately, in 1993, with the change of Administrations, the rules were

changed and the early consultation and the inclusion of the private sector to the

maximum extent feasible no longer was required.

Some may suggest that the competitive market grew after 1993, which to some

extent is true. Unfortunately, it grew in great part due to the passage of the American with Disabilities Act and the implementation of the requirement to provide

complimentary ADA service between 1992 and 1995 and some strong economic

forces during the late 1990’s as well as growth in demand for ADA services. Many

public transit agencies chose to contract for paratransit services due the numerous

variables and the complexities of providing these services and the lack of financial

resources and experience to provide these ADA mandated services. Today, according

to FTA statistics (as reported in 2000 through the National Transit Database) contracted paratransit services represent 70.8 percent of operating expenses while competitively contracted fixed-route bus (motor bus) service is only 9.8 percent of the

U.S. operating expenses. If it is good enough for our Nation’s frail elderly and disabled population, isn’t it good enough for the riding public? We look to you to change

this and to assure opportunities are enhanced allowing greater participation by the

private sector in the delivery of service through competitive contracts.

Today, I have come before you on behalf of ATSC and those who are dependent

on transit across America to encourage you to consider our recommendations for

enhancing the private sector’s participation while you deliberate on the reauthorization of TEA–21 (SAFETEA). I respectfully encourage you to reestablish those policies that require the inclusion of the private sector to the maximum extent feasible,

require FTA to certify compliance, establish tougher and enforceable regulations to

prohibit violation of the charter bus regulations and competition by the public sector

using publicly funded capital assets, and establish incentive funding available to

agencies that not only show increased ridership but who must also show efficiency

in delivering such service. Included with my submitted testimony, I have provided

proposed language for inclusion in TEA–21 (SAFETEA) reauthorization legislation

that can accomplish the enhancements suggested within this testimony.

Thank you for the honor of appearing before you today.

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PREPARED STATEMENT OF ROBERT MOLOFSKY

GENERAL COUNSEL

AMALGAMATED TRANSIT UNION

JULY 23, 2003

Mr. Chairman and Members of the Subcommittee, thank you for the opportunity

to testify today on behalf of the Amalgamated Transit Union (ATU), the largest

labor organization representing public transportation, paratransit, over-the-road,

and school bus workers in the United States and Canada, with nearly 180,000 members in over 270 locals throughout 46 States and nine provinces.

My name is Robert Molofsky. I have been General Counsel for the ATU since

1996. Prior to becoming General Counsel, I served as ATU’s Legislative and Political

Director for 15 years. Throughout the past two decades, I have participated in transit privatization cost studies, policy forums, and legislative campaigns, including

initiatives in Arizona, British Columbia, California, Colorado, Maryland, Massachusetts, New Jersey, Rhode Island, and Toronto, among others. In each case, our primary efforts have focused on promoting unbiased decisionmaking in order to avoid

artificially imposed cost models and antilabor motivations. Moreover, we have

sought to guard against job losses and ensure the delivery of safe and efficient

transportation services consistent with local policies and agreements. With this

background, I am pleased to offer our views on the role of the private sector in the

public transportation industry.

For years, ATU and all transportation labor have endorsed the long-standing Congressional policy that decisions involving the choice between public and private

transit operators should be left to local authorities who are better equipped to make

local transportation decisions. The Federal Government is clearly best suited to

making broad public policy decisions rather than micromanaging the local transit

choices selected to meet the needs of rural, urban, and suburban communities. We

firmly believe that the public versus private question should be decided on the basis

of local needs, not ideology. The Federal Government should remain neutral, and it

should not intrude on local decisionmaking.

In the past, much has been made of the statutory references to involving the private sector to the ‘‘maximum extent feasible’’ when designing local and regional

transit systems. Yet, Congressional intent dating back to the very first highway/

transit legislation in 1964 indicates that the private enterprise participation sections of the surface transportation law, now codified under TEA–21, were designed

to protect only then-existing private providers rather than any future private sector

operations.

ATU’s Position

ATU has never been opposed to the provision of transit services by private operators, so long as the methodology and criteria for service selection and final decisions

are left to local decisionmakers, consistent with applicable laws, collective bargaining agreements, and other pertinent agreements. Without question, the participation of private enterprise in the Nation’s transit sector is essential to the health

and success of the industry. And, we recognize today the emerging role played by

taxi and small van operations in providing paratransit service, especially to meet

the transit needs of our seniors, rural residents, and those on Medicare. America’s

transportation needs cannot be met by one mode alone, and they certainly cannot

be met by only one sector of such mode. In fact, ATU represents thousands of transit workers in the United States throughout the public and private sectors.

For purposes of our discussion, it is important to define the term ‘‘privatization.’’

In the area of public transportation, the term has been used to refer to various

projects, including those that provide for ‘‘competitive bidding,’’ ‘‘tendering,’’ or ‘‘subcontracting’’ of existing, new, or restructured transit service. The role of the private

sector in these situations may involve entire operations or portions thereof. Similarly, the discussion of privatization can raise different issues depending on whether

such plans involve fixed-route bus service, ADA paratransit or other specialized

service, or light and heavy rail service. The most controversial aspect of these options of course involves the contracting-out of sections of route segments or portions

of existing systems, and denying those operations the opportunity to address new

or emerging transit needs.

With respect to transit labor, two common elements are threaded through all the

variations discussed above. First, we always strive to protect the jobs of our members. Second, we seek to ensure that any potential cost savings are properly measured and weighed against potential adverse effects on safety and service.

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It has been our experience that mandated privatization of public transit through

competitive bidding serves to reduce the standard of living for workers and diminish

the transportation service provided to communities. Moreover, as discussed below,

transit privatization is based on questionable and at times false assumptions regarding competition, cost, and the mechanisms used to calculate these and other

matters.

A Brief History

Between 1964 and 1984, UMTA (FTA) provided no separate guidance relating to

the participation of private enterprise in public transportation. FTA first issued

guidance on this issue in a 1984 policy statement, ‘‘Private Enterprise Participation

in the (Federal Transit) Program,’’ which set forth the factors FTA would consider

in determining whether a recipient’s planning process appropriately considered the

participation of private enterprise. These factors included consultation with private

providers in the local planning process, consideration of private enterprise in the development of the mass transit program, the existence of records documenting the

participatory nature of the local planning process, and the rationale used in determining whether or not to contract with private operators for transit services.

In 1986, FTA expanded its private enterprise guidance for recipients under the

current 5307, 5309, 5310, and 5311 Programs in two separate circulars which outlined certain elements and procedures relating to private enterprise participation that

grantees were to use in their planning process. These guidelines were relied upon

by the FTA to intrude on the local decisionmaking process over the objections of

metropolitan planning organizations (MPO’s), transit agencies, and other community-based groups.

During the 1980’s, ATU, along with expert transit industry economists, including

the nationally known KPMG Peat Marwick accounting firm, and the Economic

Policy Institute severely criticized FTA’s requirements which obligated transit grant

recipients to utilize the so-called ‘‘fully allocated cost’’ methodology when evaluating

the cost differential between public agency costs and private sector bids for service

competitively bid. The experts agreed that such decisions should be made by comparing the private company’s bids against a public agency’s ‘‘incremental’’ or ‘‘marginal’’ costs, without requiring public bids to include costs that would not disappear

with the contracted service. The exaggerated results and misleading benefits generated by the fully allocated cost methodology was a principal reason cited by FTA

in rescinding the privatization guidelines in 1994.

In carrying out the policies of the 1980’s, FTA all too often interfered with the

local decisionmaking process affecting private sector participation. The Agency used

the transit grant program to override State/local laws and referenda, rulings of

State regulatory bodies, and local collective bargaining agreements that covered important worker issues such as prevailing and living wage requirements, health care

matters, contracting-out, and hiring rights.

For example, in 1989, FTA required Sonoma County Transit in Santa Rosa, California, to reconsider the locally determined decision to retain the unionized Golden

Gate Bridge highway and transportation district for certain fixed-route transit services rather than contract with another nonunion private operator which had in fact

submitted a higher bid for the service. FTA served as an appeals bureau forcing the

recipients to alter a locally determined decision reached in its best interest. Similarly, in 1990, Community Transit in Lynnwood, Washington, was compelled to

enter into an agreement with FTA guaranteeing that buses purchased pursuant to

a Section 5309 grant would only be used by a private operator under contract to

Community Transit. The issue arose after Community Transit sought to bring the

service in-house and utilize the buses in question. FTA subsequently refused their

request to bring the service in-house, relying on the initial agreement which FTA

unnecessarily mandated in the first place requiring that buses purchased under the

contract be used only by private operators in the area.

Moreover, in correspondence to members of the St. Louis, Missouri area Congressional delegation, FTA indicated that future transit grant funding was jeopardized

because of a locally established ordinance requiring prevailing wage standards for

private operators bidding to perform existing public transit services. Rhode Island

had a similar State law and could have been adversely affected by the policy as well.

Earlier, FTA delayed funding to Phoenix, Arizona, because the Federal Agency disapproved a locally negotiated preference in hiring provision concerning the transfer

of service from one private operator to another. These are only selected examples.

In an effort to restrain the Agency and ensure the return to the Federal policy

of neutrality on these issues, Congress in ISTEA included the language currently

codified at 49 U.S.C. 5305(e), which states:

Sec. 5305. Transportation management areas

57

1The Emperor’s New Clothes: Transit Privatization and Public Policy, Elliot D. Sclar, K.H.

Schaeffer, and Robert Brandwein, for the Economic Policy Institute.

(e) Certification.—(1) At least once every 3 years, the Secretary shall ensure

and certify that each metropolitan planning organization in each transportation management area is carrying out its responsibilities under applicable

laws of the United States. The Secretary may make the certification only

if the organization is complying with Section 134 of Title 23 and other applicable requirements of laws of the United States and the organization and

chief executive officer have approved a transportation improvement program for the area.

(3) The Secretary may not withhold certification based on the policies and

criteria a metropolitan planning organization or mass transportation grant

recipient establishes under Section 5306(a) of this Title for deciding the feasibility of private enterprise participation.

This provision was designed to ensure control by State and local governments,

their MPO’s, and transit grant recipients in developing and implementing competitive bid standards and conditions utilized for considering private sector participation

in public transit services. The measure was a response to serious concerns that FTA

was interfering with locally established decisions affecting such matters.

As part of a compromise, ISTEA (and later TEA–21) retained the ‘‘private enterprise participation’’ requirements currently codified at 49 U.S.C. 5306, which state

that metropolitan plans or transportation improvement programs must encourage,

to the maximum extent feasible, the participation of private enterprise. This compromise has worked well for all parties involved. It has allowed for the continuation

of private sector involvement in public transit services. In fact, during the past 12

years, the percentage of contracted transit service in the United States (approximately 25 percent) has remained at pre-ISTEA levels. Yet, since 1991, the question

of whether or not to utilize the private sector in the provision of such transit services has appropriately been a local decision. The Federal Government has remained

neutral on the issue of which type of transportation provider is suitable for local

communities.

The above-mentioned provision also led to FTA’s 1994 Notice of Recission of Private Enterprise Participation Guidance, which was praised by the majority of transit systems that prepared comments in response to the Agency’s proposed recission.

Yet, despite the success of Federal neutrality with regard to privatization under

ISTEA and TEA–21, SAFETEA proposes to repeal Section 5305(e)(3). It would once

again permit DOT to withhold Federal funds based on the policies and criteria established by MPO’s in determining the feasibility of private enterprise participation

in accordance with Section 5306, thereby mandating private enterprise participation

in statewide and metropolitan planning.

ATU believes that it would be a giant step backward to end the long-standing

Federal policy of neutrality with regard to local decisionmaking and transit grant

recipients’ choice of public or private transit providers, and the policies employed

for their implementation.

False Promises

As noted in a report by expert economist Elliott D. Sclar, Professor of Urban Planning at Columbia University,1 privatization establishes the wrong priority for urban

transportation systems. The primary goal of urban transportation policy should be

to improve the speed, safety, and convenience of metropolitan travel. The primary

goal of privatization is to reduce the tax money that publicly operated systems receive to transport transit-dependent people, regardless of the effect on congestion,

pollution, and the economic efficiency of the city. Thus, privatization is a significant

break with past bipartisan Federal policy that viewed urban public transportation

expenditures as investments in the Nation’s productive capacity.

Moreover, privatization confuses the efficiency and effectiveness of transportation

systems with lowering cost on individual routes. In fact, the measure of the success

or failure of urban transportation lies in its ability to move travelers between any

two points in a metropolitan area, not just between two points on a given route. One

result is that privatization advocates typically omit from their competitive cost analysis the necessary cost of increased supervision and coordination which a privatized, route-focused approach requires.

The FTA’s policies of the 1980’s failed because they sought to impose privatization

requirements on local government in an intrusive manner with the required use of

the discredited ‘‘fully allocated cost’’ methodology. This accounting system grossly

exaggerates potential savings which have yet to be realized. Moreover, the underVerDate 11-MAY-2000 07:57 Aug 12, 2004 Jkt 000000 PO 00000 Frm 00061 Fmt 6621 Sfmt 6621 95184.TXT SBANK4 PsN: SBANK4
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2Paying More, Getting Less. The Denver Experience with Bus Privatization, 1990–1995, by Elliott Sclar, Ph.D. 3 Bus Stopped: The Wheels on the Bus Go Round and Round as RTD Struggles to find a

Competent Contractor, by Jonathan Shikes. Denver Westword, January 31, 2002. (See Attachment A).

lying premise of transit privatization schemes—that private companies can reduce

the cost of service delivery and provide a chance for locally owned transportation

companies to find business—has been proven unfounded in an industry in which little competition exists.

The hope for savings from privatization rests upon an inaccurate conception of

how public contracting operates in practice. It is important to avoid simplistic textbook theories of competitive markets which do not take into account the real-world

market strategies of public contracting in which establishing monopolies, influencing

public officials, and obtaining hidden subsidies are commonly used to enrich private

investors at public expense.

The Denver Experience

Nowhere in America has transit privatization failed to deliver on lofty promises

more than in Denver, Colorado, where in 1988—in response to pressure from the

FTA—the State Legislature passed a bill mandating that 20 percent of the bus

routes operated by the Regional Transportation District (RTD) be put out for competitive bid. In 1987 and 1988 when the privatization effort was making its way

through the Legislature, the 40 percent figure was continually bandied about in relation to cost savings to convince lawmakers to vote for passage of the privatization

bill.

However, when the State auditor reviewed the cost issue in 1995, the findings

were startling. There was virtually no difference between public and private operating costs. The differences ranged from a high of 4 percent down to a low of seventenths of 1 percent, depending upon route packages. In fact, between 1989–1995, the

costs of contracted service rose at a rate approximately double that of the rest of

the system,2 costing the city $9 million more than it would have paid if the RTD

had continued operating the service.

Since the mid-1990’s, the situation in Denver has deteriorated even further. In

2000, lawmakers increased the required level of private sector participation to 35 percent. Yet, in 2002, for the third time in as many years, the RTD was forced to replace

its major private contractor, as Oak Brook, Illinois-based ATC/Vancom pleaded to

be released from a 5 year, $80 million deal to avoid financial penalties after having

trouble meeting the terms of the contract.3

ATC was hired in 2000 to run two-thirds of RTD’s privatized routes. It replaced

Knoxville, Tennessee’s TCT Transit Service, which had been fired the previous fall

after only 3 months on the job. TCT had left passengers stranded and failed to meet

RTD’s service requirements, disrupting bus service and forcing ATU drivers employed directly by RTD to pick up the slack by working overtime. In fact, TCT missed

so many runs that RTD forced ATU members to cancel their days off. Many ATU

members worked for 6 or 7 weeks straight without a day off.

Since 1989, no Colorado companies have bid on any of RTD’s routes, and finding

companies that are both willing and able to carry the load has been an insurmountable challenge for RTD.

Private Sector Opportunities Exist; Impediments Do Not

TEA–21 and FTA current practice already empower local communities to carry

out Section 5306 of Title 49, which, as indicated above, states that metropolitan

plans or transportation improvement programs must encourage, to the maximum

extent feasible, the participation of private enterprise:

• Local officials have the authority to determine if, when, and how routes are evaluated;

• Local officials have the authority to determine what factors they use in determining whether to use private or public transit providers. Federal policy permits

locals to determine the extent to which costs are considered and whether they

want to use the fully allocated cost methodology or another cost approach;

• Local officials, in determining overall local process, may determine if a dispute

process is appropriate, and, if so, what that process will be;

• Local officials, at their option, may take into consideration local situations that

may affect decisions on transit providers;

• FTA reviews the local process as part of Triennial Review and verifies that the

local process is being observed;

• FTA certifies the local planning process, which must follow Section 5306.

59

4Transit Labor Arrangements: Most Transit Agencies Report Impacts Are Minimal, GAO–02–

78, November, 2001. 5 Contracting for Bus and Demand-Responsive Transit Services: A Survey of U.S. Practice and

Experience, TRB, 2001, Question 19, Table D–17.

In addition, under SAFETEA, for the first time, private operators would be eligible as ‘‘sub-recipients’’ of Federal formula funds under Sections 5307, 5311, Job Access and Reverse Commute Program, and the proposed New Freedom Program. As

direct sub-recipients, they would be permitted to do more than simply compete for

contracts with a public transit provider; they would be eligible to receive grants for

the provision of public transportation services that they define and deliver.

Section 13(c) Employee Protective Arrangements Not a Factor in Decisions to

Contract-Out

Historically, one of the major issues raised by Section 13(c) critics has been that

it impairs the ability of transit agencies to contract-out for transit services. However, transit officials in a recent GAO report4 indicated that Section 13(c) does not

directly limit an agency’s actual ability to contract-out, a claim supported by another

recent report, Contracting for Bus and Demand-Responsive Transit Services: A Survey of U.S. Practice and Experience, published in 2001 by the Transportation Research Board (TRB), and sponsored by the FTA, as directed by TEA–21. These

reports dispel the myths about 13(c) and clearly substantiate the ATU’s long-standing

position that the provision does not unduly restrict the ability of transit providers

to contract-out.

The TRB report correctly notes that, in fact, hundreds of U.S. transit systems, of

all sizes and types, now contract for some transit services, and approximately onethird of the agencies contract-out more than 25 percent of their service. Most significantly, the report indicates, neither the general managers that currently contract-out

nor those that do not, identified Section 13(c) as influencing their decision.

In fact, when asked why they do not contract-out transit services, 70 of 87 transit

systems surveyed said that Section 13(c) played ‘‘No Factor’’ in the decision. Rather,

the reasons most cited by transit systems for not contracting included:

• ‘‘Maintain control;’’

• ‘‘Not cost-effective;’’

• ‘‘No reason to change;’’

• ‘‘Lack of qualified firms.’’ 5

Service Suffers

The TRB report also dispelled the myth that private firms will respond to competitive market pressures and provide much better service at a lower cost. For those

agencies that do contract-out their work, the report found that privatizing transit

services results in fewer, rather than more bidders. Cost savings, moreover, were

far slimmer than projected—0–5 percent rather than 10–15 percent—and they decreased over time. Also, nearly 40 percent of those transit properties that do contractout their services reported that service quality and customer service are negatively

impacted by privatizing services. Safety, maintenance concerns, and high employee

turnover all contributed to this negative impact on service quality when services are

privatized, the report notes.

Recommendations

Rather than resorting to the failed policies of the 1980’s, Amalgamated Transit

Union recommends the Subcommittee consider adding language to the planning provisions in connection with the diversification of MPO boards, requiring MPO’s to appoint transit workforce representatives, private operators, minority groups, transit

riders, bicycle and pedestrian advocates, businesses, and others with a direct stake

in the provision of public transportation services to sit on such panels, with the

right to vote. We also support requiring the governors to appoint these representatives for statewide planning.

Under current law, private providers of transportation, along with other interested parties, are given a ‘‘reasonable opportunity to comment’’ on transportation

plans, but like transit workforce representatives, they are not afforded a seat on the

board, and they certainly have no voting rights. These constituency groups would,

as intended in the original process, bring a real world and informed perspective to

the MPO boards, with a genuine ability to be heard and effect the decisionmaking

process.

In a major policy reversal from the Federal role of neutrality embodied in ISTEA

and TEA–21, SAFETEA would allow private operators to essentially write their own

ticket. In fact, by repealing Section 5305(e)(3), injecting private operators into the

60

goals and objectives developed through the statewide and metropolitan planning

process, and making them eligible to directly receive grants as sub-recipients, FTA

is proposing that private operators be able to operate the very service they plan!

This combination of factors would discriminate against all other transit constituency groups by affording only private providers a formal role in the planning process

for specialized transportation services to the exclusion of all other interest groups,

including environmentalists, seniors, transit workforce representatives, and others.

ATU strongly urges the Subcommittee to oppose these changes, and we recommend

that it encourage labor-management partnerships to address these complicated privatization issues. We have empowered our locals to meet with their managers and

professionally review the real cost issues, productivity measures, and service requirements to achieve meaningful savings when necessary.

Of course, private sector involvement in transit remains a viable option in many

instances. However, such decisions should be made on a case-by-case basis after a

thorough analysis of the relative costs and benefits involved. The bottom line is that

Federally controlled privatization, initiated in Washington, DC, and forced on local

and State governments, is not in the best interests of either the Nation’s commuters

or its taxpayers.

Thank you for the opportunity to testify today. I would be pleased to answer any

questions at this time.

61

Attachment A

Copyright 2002 Denver Westword, LLC

Denver Westword (Colorado)

January 31, 2002 Thursday

SECTION: News/News

LENGTH: 789 words

HEADLINE: Bus Stopped:

The wheels on the bus go round and round as RTD struggles to find a

competent contractor.

BYLINE: By Jonathan Shikes

BODY: For the third time in as many years, the Regional Transportation District

will have to replace its major private contractor, as Oak Brook, Illinois-based ATC/

Vancom has begged out of a 5-year, $80.1 million deal.

The company, which is a division of British conglomerate National Express Corporation, did not give a reason for its decision to abruptly leave Denver, but RTD

spokesman Scott Reed says he believes ATC wants to consolidate its operations in

light of the economic recession that has enveloped the United States in the last

year.

‘‘They want to pull out, and we are happy to see them do it,’’ adds RTD board

member Dick McLean. ‘‘I think they were having trouble meeting the terms of the

contract, and if they cannot do the job, they take a financial penalty. My guess is

that they do not want to incur that, and that they’d rather get out now.’’

A woman who answered the phone at ATC’s Denver office said acting manager

Rick Murray would have no comment on why ATC was leaving the city. No one from

the company’s Illinois administrative offices, including CEO Jim Long, returned

phone calls from Westword.

ATC was hired in August 2000 to run two-thirds of RTD’s privatized routes. It

replaced Knoxville, Tennessee’s TCT Transit Service, which had been fired the previous fall after only 3 months on the job. TCT had left passengers stranded and

failed to meet RTD’s service requirements, forcing unionized drivers employed by

the district to pick up the slack by working overtime. TCT said it hadn’t been able

to hire enough drivers because of the tight labor market. When ATC took over, company officials promised they wouldn’t have the same problem.

But only a year later, the company asked to be relieved of half of its routes, Reed

says, which were bid out to another transportation conglomerate, First Transit Inc.

of Cincinnati. In December, ATC asked to be released from the rest of its contract,

and RTD is currently negotiating with the company on how to accomplish that as

soon as possible without disrupting bus service again. It has also asked First Transit to step in and take over the remainder of ATC’s routes.

‘‘We have had numerous service problems with ATC,’’ Reed explains, ‘‘so this is

probably the best solution and will hopefully provide better service to the riding

public.’’ He adds that the financial arrangements with both companies won’t be revealed until the discussions are completed sometime in February.

In 1989, the Colorado Legislature passed a law requiring RTD to privatize 20 percent of its routes. Two years ago, lawmakers upped that number to 35 percent. The

theory was that private companies would reduce the cost of providing bus service

and provide a chance for locally owned transportation companies to find business.

But no Colorado companies have bid on any of RTD’s routes, and finding companies that are both willing and able to carry the load has been a nightmare for the

district. Laidlaw Inc., which is based in Canada, had the job before TCT; it now provides service to about one-third of RTD’s privatized routes.

‘‘The whole thing has been a sham since the start,’’ says Bill Jones, a lobbyist for

the Amalgamated Transit Union, Local 1001, which represents bus drivers employed directly by RTD. ‘‘Privatization might sound good for the taxpayer except for

the crappy service we have gotten. We have always said that the privatized buses

should be painted bright yellow, because we want people to know the difference between them and us.’’

While union drivers were able to bail RTD out of the situation with TCT, Jones

says the district will be out of luck next time. ‘‘The first part is that at the time,

we were under 20 percent privatization. The problem now is that with 35 percent

contracted, RTD drivers cannot possibly step in and take over—we do not have the

manpower. The second part is, we, the union, are not going to lift one finger to help.

Last time, with TCT, they missed so many runs that they forced our members to

cancel their vacations and they would not allow anyone to take days off. We literally

62

had people here who worked for 6 or 7 weeks straight without a day off. It was just

horrible.’’

Whether First Transit will be any better than the previous companies is anyone’s

guess, however. ‘‘It is to the point where board members do not want to have the

private contractors supply the routes in their districts because they get all the complaints,’’ says RTD board chairwoman Mary Blue. Blue, who could not remember

the name of the new company, doesn’t know if RTD has looked into the finances

of First Transit any more carefully than it did those of ATC or TCT. ‘‘I think our

staff does research to the extent that it is possible.’’

—————

PREPARED STATEMENT OF PETER J. PANTUSO

PRESIDENT AND CHIEF EXECUTIVE OFFICER

AMERICAN BUS ASSOCIATION

JULY 23, 2003

Introduction

Good afternoon, Mr. Chairman and Members of the Committee. My name is Peter

J. Pantuso, and I serve as President and Chief Executive Officer of the American

Bus Association. The ABA is the trade organization of the private over-the-road bus

industry, and composed of 3,400 organizations, approximately 800 of which are bus

operators. ABA members engage in all manners of transportation services across the

Nation. ABA members provide commuter service, intercity service, travel, tour, and

charter service, and shuttle service to and from our Nation’s airports.

The private bus operators provide scheduled service to 5,000 communities and to

774 million passengers each year. This is more service to more locations and more

people than the airlines and Amtrak combined deliver. In fact, we transport more

people in 2 weeks than Amtrak does in 1 year. In many areas throughout the country, motorcoach or intercity bus travel is the only form of public transportation

available to citizens, particularly in rural areas.

For example, a half dozen charter bus operators in Colorado provide service to 20

States west of the Mississippi. A similar number of operators based in Rhode Island

provide service to all the States east of that river. Academy Bus Lines provide commuter service throughout New York, New Jersey, and Connecticut. Finally, New

Hampshire’s Concord Trailways Bus Company and its affiliate, Dartmouth Coach,

one of the larger independent motorcoach carriers in New England, provide daily

intercity service to Boston and Logan Airport from 34 cities and towns in Maine and

New Hampshire. Thirty-one of these cities have no other form of intercity public

transportation.

ABA members provide these many motorcoach services with less Federal subsidy,

by far, than any other mode of transportation. At the end of my testimony is a copy

of a report by Nathan Associates, Inc., which details the Federal subsidies to passenger modes between 1960 and 2001. This report is dramatic evidence of the lack

of subsidy given to intercity bus transportation. We buy our own equipment, maintain our own terminals, train our own employees, and still manage to maintain our

position as the safest mode of transportation.

On behalf of the 3,400 members of the ABA, I want to thank you very much for

this opportunity to appear before the Committee to address the issue of enhancing

private participation in providing public transportation. As you might expect, the

ABA and its members have very specific ideas about how private participation can

be enhanced.

Intercity Motorcoach Security Funding

Before turning to our recommendations that fall within the Committee’s jurisdiction, I want to raise the subject of intercity bus security. Support for intercity bus

security is a critical step in strengthening the private sector’s ability to provide public transportation. Intercity bus companies need that support in order to continue

to provide their services, particularly in rural areas.

Fortunately, Congress has spoken on this issue, and in the last 2 years has appropriated $25 million for intercity bus security. The problem is that the Transportation Security Administration (TSA) has refused to spend this money. Instead, TSA

has tried to get Congressional approval to reprogram these funds to aviation security. Congress has thus far refused TSA, but the Agency will still not release these

funds.

You will note our industry’s frustration in light of the TSA’s spending billions on

aviation security but refusal to spend the relatively small amount Congress has apVerDate 11-MAY-2000 07:57 Aug 12, 2004 Jkt 000000 PO 00000 Frm 00066 Fmt 6621 Sfmt 6621 95184.TXT SBANK4 PsN: SBANK4
63

propriated specifically for intercity bus security. Our members want to take

proactive measures that further protect the traveling public, such as increasing passenger screening, installing driver shields, putting disabling switches on buses, and

improving emergency communications, but we need some help. We do not have the

capital both to acquire and maintain buses, garages, and terminals and to fund

these security programs. We welcome any help this Committee can give in encouraging TSA to release the intercity bus security funds.

That said, let me turn to ABA’s recommendations for enhancing private participation in providing transportation. Perhaps surprisingly to those who are unfamiliar

with the private bus industry, our ideas do not come with pleas for ‘‘set-asides,’’ a

radical restructuring of the Federal Transit Administration (FTA), significant

changes in the Federal Transit Act, or even a huge ‘‘price tag.’’ Rather, what the

ABA advocates is several steps this Committee could take to help the private bus

operators continue to provide service to the American traveling public at little or

reduced cost to the taxpayers.

ADA Funding

First, ABA believes that additional funds are needed in one area. That area is

the provision in TEA–21 that sets up a competitive grant program to place wheelchair lifts on motorcoaches. The program, administered by the FTA, uses criteria

such as the applicant’s service area, fleet size, and population served, to put these

funds where they will do the most good. But the program is underfunded. For this,

the last year of TEA–21, the fund provides $7.1 million for wheelchair lifts. Since

the Transportation Research Board (TRB) estimates the cost of equipping a motorcoach with a wheelchair lift is approximately $35,000, and the $7 million provides

roughly enough money to equip 200 buses with wheelchair lifts. However, the Americans with Disabilities Act (ADA) requires that by 2012 all of the Nation’s private

motorcoaches in fixed-route service be wheelchair lift equipped and all other motorcoach operators must provide a lift-equipped vehicle on 48 hours notice. The need

for additional funds for this program is obvious.

Moreover, the private motorcoach industry cannot afford to meet this Federal

mandate without Federal help. The average ABA member has fewer than 10

motorcoaches and I know of no ABA member who could find the $350,000 in their

budgets to equip all of its coaches with wheelchair lifts. Failure to meet the ADA

mandate will require ABA members to go out of business to the detriment of the

traveling public as well as to the detriment of the small business community, as a

majority of motorcoach companies in the Nation are small businesses. It must be

said that only the private operators face this dismal prospect. The publicly funded

transit agencies can get up to 90 percent of their costs (equipment, facilities, etc.)

paid for by the Federal Government. ABA members, as I stated earlier, pay for their

own equipment, training their own personnel, build their own facilities. A fully

funded wheelchair lift accessibility fund is critical to the health of the industry and

the provision of transportation in this country.

Appended to my testimony is a recent letter from Congressman Jim Langevin to

Chairman Young and Ranking Member Oberstar of the House Transportation and

Infrastructure Committee. The letter speaks more eloquently than I about the need

for more funds for wheelchair lifts. Congressman Langevin writes, ‘‘Our Nation’s

bus owners and operators wish to comply with the requirements of the ADA to guarantee access to people with disabilities, and the Federal Government must be an

active partner in reaching this goal through appropriate funding of the Wheelchair

Lift Accessibility Fund.’’

Intermodal Facilities Funding

Another way to enhance private participation in providing public transportation

is to provide a dedicated source of Federal funding to create a network of intermodal

passenger facilities that will provide seamless intercity and local public transportation. The Nation’s surface public transportation system comprises four different

modes—motorcoaches, intercity rail, urban mass transit, and rural local transit. To

be truly effective alternatives to the private automobile, these modes must be linked

to each other and to airports at intermodal transfer facilities that provide seamless

transportation for the traveling public. Today, there are perhaps 150 true intermodal passenger terminals in the country, although few bring together all modes.

Yet, there is a critical need for connections between local transit and intercity

services, and between rural transit and intercity bus services, with through connections to intercity rail and air services not available locally. Moreover, buses picking

up charter or tour groups arriving by airplane or rail need parking facilities at those

terminals. And people in suburban areas need park and ride facilities for convenient

access to public transportation.

64

It is true that under TEA–21, intermodal facilities are eligible for funding under

a variety of programs including Surface Transportation Program (STP), Congestion

Mitigation and Air Quality Program (CMAQ), and the transit discretionary programs. However, very few intermodal facilities have been funded under these programs. In our view there are three reasons for this lack of intermodal facilities.

One, there is no dedicated funding stream for intermodal facilities. Two, spending

decisions at the State and local level are not dependant on how a project relates

to and enhances other transportation modes. Three, these facilities do not enjoy a

mode-specific constituency like highway or transit improvements. Given these three

factors it is no surprise that intermodal facilities rarely become a high enough planning priority to receive funding.

However, the need is there and for the reauthorization of TEA–21 a solution is

at hand. The Administration’s reauthorization bill, SAFETEA, contains a provision

(Section 6002) to establish a Federal fund dedicated exclusively to the development

of intermodal passenger transfer facilities and integrated public transportation

information systems. Funding would be used as seed money for a variety of intermodal projects distributed throughout the country and would be awarded on a competitive basis. Eligible projects are those that connect intercity bus service and any

other mode of public transportation through intermodal facilities and integrated information systems. SAFETEA has $85 million for this new intermodal transportation facilities fund.

House bill H.R. 1394, The Intermodal Transportation Act, contains the same provision and funds it at $100 million. ABA certainly supports this provision but not only

for the facilities themselves. In addition to the prospect of new and needed facilities,

experience has shown that such facilities aid the economic development of the entire

area. Meridian, Mississippi, Minneapolis, Minnesota, and Everett, Washington have

each recently built such a facility, and one of the benefits of the transfer facility

at each location has been the development of shops, stores, and services. In the case

of Everett, a community college has also located in the area near the facility. These

types of intermodal facilities are needed across the country to connect the rural,

urban and suburban populations. ABA asks that the Banking Committee include

this proposal in its TEA–21 reauthorization bill.

The lack of intermodal transportation facilities brings another issue and problem

for the bus industry into sharp focus. Intercity buses are rarely included in the

State or local planning process required for Federal funding, and as a result, intercity buses and those that rely on them rarely receive the Federal support that is

needed. Most intercity bus service is provided by the private sector without subsidies. But with rising costs, much of that service, especially rural service, has

disappeared, leaving many communities without intercity public transportation. Because of the lack of intermodal passenger facilities, intercity bus patrons are left

without the means to make needed public transportation connections. These are

issues that should be addressed by transportation planning. They frequently are not

addressed.

Why this situation goes uncorrected is the product of several factors. First, bus

projects are typically small in scope and therefore, are not on the ‘‘radar screen,’’

especially when private bus operators and riders are often not involved in the planning process. Second, States can currently divert designated rural intercity bus

funds to other causes by asserting that they face no ‘‘unmet intercity bus needs,’’

without engaging in a planning process involving the private bus operators and riders. Third, FTA policy restricts the use of Section 5309 funds to use for only the

‘‘transit’’ and intercity rail portions of intermodal facilities, barring the use of those

funds for the intercity bus portions of those facilities.

The result is that critical bus facilities and services do not get funded. The solution is to first authorize FTA to withhold funds from any metro planning organization or transit agency within its jurisdiction that omitted private operators in the

planning and transportation improvement program. Second, the law should be clear

that inclusion of private operators in the planning program is intended to preserve

private services that already exist, as well as to involve the private sector in new

services. Third, the law should clarify that Section 5309 intermodal funds may be

used for the intercity bus portions of intermodal facilities, as well as the transit and

intercity rail portions. And States should be required to use rural intercity bus program funding for its intended purpose and should include private bus operators in

the planning process for that funding.

Rural Transportation

Another opportunity for this Committee to enhance private participation in transportation services is to increase the funding for the so-called 5311(f) program. Section 5311(f) provides funds for private operators to provide rural transportation. The

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rural areas of the country are most in need of additional transportation services.

Over the last 30 years, some 20,000 rural communities have lost bus service. First,

in ISTEA and then in TEA–21, the 5311(f) program has been instrumental in reversing the decline in bus service to rural communities. In this regard, the ABA and

its members congratulates the States of Pennsylvania and Colorado, which have

been the leaders in the effective use of 5311(f) funds to restore rural bus service.

Rural bus service not only provides essential passenger transportation, but also its

incidental package express service is the only form of daily, scheduled freight service for many of these small towns. The program is funded at slightly more than $30

million. It has proved its effectiveness and its worth and should be reauthorized and

funding to it should be increased.

The program’s effectiveness can be measured. Greyhound Lines, Inc., an ABA member, reports that in 2002, it received $4.7 million in section 5311(f) operating

funds. With these funds, Greyhound served 332 communities, which otherwise

would not have service. That works out to approximately $14,000 per community.

In addition, the aforementioned Nathan Study (pg. 9, fig. 9) represents the increase

in the number of cities which have had bus service restored since the mid-1990’s,

not coincidentally the beginning of the 5211(f) program.

By comparison, the Essential Air Service program serves approximately 125 com- munities with roughly $125 million in annual subsidies, or approximately $1 million

per community. Certainly, the EAS program is providing a valuable public service,

but in these tight budget times, it will be very difficult to expand that program even

though many communities are clamoring to be tied into the Nation’s commercial

aviation program.

We believe the answer to this problem is to supplement EAS with an essential

bus service program, which would be patterned after the section 5311(f) program

and funded at about the same level. Under this program, States would contract with

intercity bus operators to provide surface transportation services from rural communities directly to commercial airports. H.R. 1394, the Intermodal Transportation Act,

proposes such a program. We believe that this program could connect many times

the number of communities served by EAS to the national aviation system.

Motorcoach Operations

Everyday motorcoaches bring people, as tourists, commuters, and shoppers into

the Nation’s cities. And everyday these motorcoaches are confronted with obstacles

to their safe and efficient operations. Obstacles put in place by public officials who

do not seem to consider the good that motorcoaches do. One area that is ripe for

change and a change necessary to allow the private bus operators to participate

fully in providing public transportation is to find adequate bus parking. In most cities across the country, motorcoach operators face limited options for parking vehicles used for charter, tour, and commuter services. Also, operators are penalized for

idling their buses and must often circulate city streets while waiting for their

groups. This wastes fuel and contributes to traffic congestion and engine emissions

in urban centers.

Buses provide an important public benefit by providing an alternative to private

cars. These bus services reduce the level of traffic congestion and the ills associated

with it, including air pollution and reduced productivity. Also tour and charter services bring an economic boost to the local economy. By one study (a copy of which

is appended to the end of my testimony), one bus of tourists staying overnight in

a destination leaves as much as $11,000 in the local economy. Inadequate bus parking reduces these benefits to the local area and economy.

ABA also understands communities’ efforts to curtail emissions; in fact, buses are

a part of any equation to solve the problem. However, there is a problem where communities go too far and restrict bus operations in the false hope that to do so would

restrict harmful emissions. Unreasonable idling rules and parking restrictions are

just as harmful. Buses need at least 10 minutes idling time to provide sufficient

braking power and air conditioning for the passengers’ comforts.

There is a solution to this problem. It has been under discussion between the ABA

and the American Public Transportation Association (APTA is the association that

represents publicly funded transit agencies). The remedy is to allow the private bus

operators to use the terminal facilities of public transit agencies. Transit agencies

usually operate terminals with parking facilities and during their peak daytime

hours of operation, most of the transit buses are on the streets, leaving the terminal

facilities available for other uses.

The private motorcoach operators could use the transit agency’s parking facilities

to park off of city streets and in a safe and accessible facility thereby saving fuel

and reducing traffic congestion and engine emissions. This would also ease the need

for local governments to provide separate parking facilities for charter, tour, and

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commuter motorcoaches. We have also suggested that Congress consider a demonstration program for some of the most frequently visited tourist destinations to

develop solutions to the parking challenges facing urban areas.

Another obstacle is any prohibition against buses using HOV lanes when

‘‘deadheading’’ (that is, running empty) to its terminal after or before a run. A motorcoach can take as many as 50 cars off a highway. What better way to provide

for the public than to facilitate on time, frequent service than to allow buses to access these lanes? For the same reasons, motorcoaches should be exempt from paying

tolls while engaging in transportation operations.

Public Funds vs. Private Operators

Another area that requires attention is the tendency of some Federal, State, and

community funded transportation services; transit services which want to compete

with private operators who have limited funds. Simply stated, Federal funds should

not be used to compete with private bus operators where the private sector is willing

and able to provide service. Public funds would be better spent on necessary services

leaving the provision of most transportation to the private sector. In addition to providing transit service, some public transit agencies are beginning to ‘‘link’’ up with

each other to provide intercity bus service and even tour and sightseeing services.

No other transportation mode has to face this subsidized competition. The Nation

does not have a national airline and Amtrak was formed only after it became abundantly clear that the privately owned U.S. railroads could not profitably transport

passengers. The private motorcoach industry should likewise be free from competition by government entities.

A recent example of this problem is found within the District of Columbia where

there is a plan to establish a bus ‘‘circulator’’ to take tourists around the Washington monuments and sights. The plan, as reported in The Washington Post, would

cost $37 million the first year and would be in direct competition with the three

private tour bus services currently operating within Washington. There is no reason

for such a service, and it certainly cuts against the notion that the public sector

should not be engaged in any service that is provided, safely, and at reasonable cost,

by the private sector.

A related problem is that of publicly funded transit agencies which illegally provide charter services to the public in contravention of the Federal Transit Administration charter rules. The rules provide that private companies be given the first

opportunity to provide charter service and that only if a ‘‘willing and able’’ private

operator is not available, may a publicly funded transit agency, with its Federally

funded equipment and cost advantage, operate the charter.

However, ABA has catalogued many instances where the charter rules are not followed. Either the public transit agency does not notify the FTA, ABA, or local operators of the charter opportunity or it uses its cost advantage to operate the charter

below cost and below what the private operator can charge.

Finally, with budgets tight and transit agencies seeking riders some are exploring

the idea of two agencies linking up at the edge of each agency’s service area to provide intercity bus service, in direct competition to the network of private bus operators currently active.

ABA and APTA are in discussions to find ways to eliminate these charter violations. The two organizations have discussed several ideas. One idea of particular

merit would entail realistic penalties for violations of the transit competition rules.

Currently, if a transit agency is found to have violated the rules, FTA’s only recourse is to deprive that agency of its Federal funding—the entire agency’s Federal

funding. As a practical matter, ABA believes that such a penalty will never be imposed. As an alternative, the two organizations are discussing the necessity of a

graduated series of penalties, perhaps the profit or cost of providing the charter or

a percentage of the agency’s funding. To the ABA, this approach makes more sense

and the penalties have a greater chance of being imposed.

A second ABA goal is the clarification of the definitions of ‘‘charter service,’’

‘‘sightseeing’’ and ‘‘regular and continuing service’’ in connection with shuttle service

to prevent confusion as to which transportation provider can provide what service.

Finally, in aid of preventing the public sector from doing what the private sector

does best, ABA believes that the public transit agencies should not be allowed to

operate scheduled bus service beyond the urban area where it provides regularly

scheduled mass transportation services.

Finally, it goes without saying that the ABA opposes any attempt to weaken the

current charter regulations. Our major disagreement with the Administration’s

SAFETEA bill is in the bill’s Section 3020 which would allow the Secretary of

Transportation to eliminate the FTA charter rules if a transit agency can say that

it is providing service to the elderly or the disabled. That is service the private secVerDate 11-MAY-2000 07:57 Aug 12, 2004 Jkt 000000 PO 00000 Frm 00070 Fmt 6621 Sfmt 6621 95184.TXT SBANK4 PsN: SBANK4
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tor provides and provides well and represents at least 40 percent of our current customer base. It bears repeating that public funds should not be used when there is

a vibrant private sector willing and able to do the job.

Conclusion

Mr. Chairman, Members of the Committee, the ABA and its members have really

one goal. That is to ensure that the private bus companies are allowed the opportunity to compete for business on a level playing field, allowing us to do what we

do best: Provide the greatest number of Americans with the widest array of transportation services at the lowest cost with the least amount of Government subsidy.

Please note that all of the suggestions I outline in my testimony carry a relatively

small ‘‘price tag,’’ require no intrusion on other modes of transportation and serve

only to strengthen the Nation’s transportation system. The needs of the private bus

industry are small, but the payoff to the traveling public is great. The ABA and its

3,400 members and the 774 million people it serves each year hope that you will

agree with these suggestions and use them to enhance private participation in providing transportation to the Nation. Thank you for your consideration and I will be

happy to answer any questions from the Members of the Committee.

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PREPARED STATEMENT OF MARGIE WILCOX

CO-CHAIR OF THE PARATRANSIT

AND CONTRACTING STEERING COMMITTEE

TAXICAB, LIMOUSINE, AND PARATRANSIT ASSOCIATION

JULY 23, 2003

Executive Summary

On behalf of our country’s private taxicab, paratransit, and contract service providers, we appreciate this opportunity to testify on the benefits of reinvigorating private sector participation in the provision of public transportation services funded by

the Federal Transit Administration.

INDUSTRY OVERVIEW

The Taxicab, Limousine, & Paratransit Association (TLPA), formed in 1917, is the

National organization that represents the owners and managers of taxicab, limousine, sedan, airport shuttle, paratransit, and nonemergency medical fleets. TLPA

has over 1,000 member companies that operate 124,000 passenger vehicles. TLPA

member companies transport over 2 million passengers each day and more than 900

million passengers annually.

The taxicab, limousine, and paratransit industry is an essential part of public

transportation that is vital to this country’s commerce and mobility, to the relief of

traffic congestion, and to improving the environment. The private taxicab, limousine, and paratransit industry transports 2 billion passengers annually, compared

to the 9 billion passengers transported by public transit; provides half of all the

specialized paratransit services furnished to persons with disabilities; serves as a

feeder service to major transit stations and airports; and provides about half of its

service to transportation disadvantaged people, such as the elderly, who are either

not able to drive or do not have a car.

TLPA REAUTHORIZATION RECOMMENDATIONS

TLPA urges the following legislative actions be included in the Senate transportation reauthorization bill to advance the public policy benefits that would be derived from a significant expansion of the role private operators play in the delivery

of public transportation services.

Repeal Section 5305(e)(3), the Antiprivate Transportation Operator Federal

Transit Act Planning Provision

The President’s Reauthorization bill (SAFETEA) included the repeal of this provision (by rewriting the planning sections of the Federal Transit Act and eliminating

this provision), and TLPA strongly urges the Senate to adopt this recommendation.

The law and Congressional intent mandate a role for the private sector in planning

for public transit services, yet at the same time, this section explicitly prohibits enforcement of the law. This provision is responsible for private transportation providers being pushed away from the transit-planning table. We believe the best path

to more efficient public transportation is to have all the stakeholders such as local

officials, consumers, public transit operators, private transportation operators, and

labor be included in the planning process. We do not advocate excluding anyone. We

urge the Senate to support repeal of this section.

Require DOL and DOT to Amend Their Administration of the Federal Transit

Act Labor Protections to Make Them Less of an Obstacle to the Efficient

and Effective Provision of Public Transportation Services

There are four core actions that should be taken regarding transit labor protections: (1) The carryover of the workforce issue needs to be addressed by declaring

that a change in contractors is not an event that gives rise to Section 5333(b) protections; (2) similarly, it should be made clear that there is not a required carryover

of workforce in ‘‘public to private’’ transitions where no employees are dismissed as

a result of a Federal project; (3) clarify that binding interest arbitration is not a required provision under Section 5333(b); and (4) limit the review of Federal Transit

grants to be conducted by the Federal Transit Administration, eliminating the current practice of subjecting FTA grants to review not only by DOL, but by private

entities (the national offices of the relevant transit labor unions). We believe the

U.S. Department of Transportation is fully capable of administering its grant program without outside assistance.

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Direct FTA to Issue a Private Sector Participation Policy

There is ample, indisputable evidence that the Private Sector Participation Guidance, developed and promoted by the Reagan and Bush Administrations, was a

great success, increasing competitive contracting of public transit services from $10

million to $500 million per year in the course of one decade. Since the Clinton

Administration rescinded this Private Sector Participation Guidance in 1994, consideration of the private sector has stagnated. Requiring the FTA to conduct a rulemaking to reestablish private sector participation guidance to implement the private

sector provisions of the statute would result in increasing the efficiency and effectiveness of public transit operations to the benefit of all transit riders.

Include President Bush’s New Freedom Initiative Program in the Senate

Reauthorization Bill and Include Language Making Private Operators

Eligible Subrecipients for the Program

The President’s New Freedom program will provide greater mobility for disabled

persons. The program, which would be administered through the FTA, would authorize funding to qualified organizations (community groups or directly to taxicab

companies) for use in enhancing local transportation services for disabled persons

by working with private taxicab service providers to fund the purchase, promotion,

and operation of taxi-vans that meet Federal accessibility requirements. The service

would enhance the ability of disabled persons to reach work, schools, and other

places in the community.

Require that FTA’s Special Needs Programs: Job Access and Reverse Commute,

New Freedom, and Section 5310, Utilize the Same Planning and

Eligibility Guidelines and Definitions

Each one of these special needs programs has a slightly different target audience,

JARC is geared toward unemployed and welfare to work individuals; New Freedom

is intended for disabled individuals whose needs cannot be met by Americans with

Disabilities Act accessible transportation options; and Section 5310 assists private

nonprofit groups and certain public bodies in meeting the transportation needs of

elders and persons with disabilities. However, there are such similarities and potential synergies among the programs that TLPA urges that the

Senate require that each program be required to have uniform planning and eligibility requirements using the JARC planning and eligibility requirements as the

model of the uniform guidelines.

Require an MPO to Have an Eligible Private Transportation Operator be

Appointed as a Voting Member of the MPO if the Public Transit

Operator is a Voting Member

Under President Bush’s fiscal year 2004 Federal Budget proposal and the Administration’s Reauthorization bill, the local transit planning process will be greatly

strengthened with more funding and with a clear mandate to reach a local consensus on issues. Because the traveling public benefits equally from using privately

provided and publicly provided mass transit services, private transit operators

should have an equal voice with public transit operators in planning and designing

local transit services. As stated above, we believe the very best path to more efficient public transportation is to have all the stakeholders be included in the planning process.

TLPA Legislative Initiatives

More detailed explanation for each of the TLPA legislative initiatives listed in the

Executive Summary follows.

BACKGROUND OF THE FEDERAL TRANSIT ACT AND ITS PRIVATE SECTOR

PARTICIPATION PROVISIONS

The Urban Mass Transit Act of 1964 was the Congressional response to the dismal condition of the private sector transit industry in the 1960’s. In the decade just

prior to the enactment, 243 transit companies were sold and another 194 were abandoned. These sales and abandonments had a profound effect on transit labor and

transit services. Between 1945 and 1960, transit employment fell from 242,000

employees to 156,000 employees. Although mass transit had been generally viewed

as a local, rather than a national issue, many Members in Congress viewed the Federal mass transportation program as a necessary step to preserve both transit jobs

and transit services. One of the principal features of the 1964 Act was to provide

Federal funding for local public bodies to acquire financially troubled private transit

companies.

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Private Enterprise Requirements in the Federal Transit Act

Since its inception, the Federal Transit Act has recognized the importance of private sector participation in Federal Mass Transportation program. Section 5323

(a)(1)(B) [formerly 3(e)], Section 5303 (e & f) [formerly 8(e)], Section 5304(d) [formerly 8(h)], Section 5306(a) [formerly 8(o)], and Section 5307(c) [formerly 9(f)] mandate private sector participation in programs assisted by Federal transit grants.

(When discussing the Federal Transit Act, it is sometimes confusing because one

person may refer to Section 16(b)(2), Section 8(o), or Section 13(c), while another

person may refer to Section 5310(d), Section 5306 (a), or Section 5333(b). Both people are referring to the same provisions of the Act, but the citations are different

because in July 1994, after 30 years, Public Law 103–272 repealed the Federal

Transit Act and related transit provisions and reenacted them as Chapter 53 of

Title 49, United Sates Code.)

Although the private enterprise participation requirements had been the law for

nearly two decades (1964–1984), contracting of services to private operators was a

minimal $10 million per year in the early 1980’s. Then in 1984, in response to President Reagan’s call for a greater private sector role in addressing community needs,

the Federal Transit Administration issued the Private Enterprise Participation

(PEP) Policy that called for the use of private providers in transportation wherever

practical. The reason given for this policy was that injecting competition into the

provision of public transit services would result in lower costs for quality services.

It was also thought that in addition to real cost savings, contracting-out some services would limit the growth in transit agencies’ own costs for providing services.

Success of the PEP Policy is well documented. From 1984 through 1990, the

amount of privately contracted transit bus service increased by 62.5 percent. The

amount of privately contracted paratransit service increased by 135 percent from

1984 to 1991. The FTA Private Enterprise Participation Policies helped encourage

competition and has provided a framework for the transit communities to meet the

requirements in the Federal Transit Act of 1964, as amended, that private transportation companies are included, to the maximum extent feasible, in the planning and

delivery of transit services. The FTA private enterprise policy was very successful

in that competitive contracting reduced public costs in three ways:

• Directly through lower service costs that typically ranged from 20 percent to 40

percent.

• Indirectly though ‘‘ripple effect’’ impacts on services that have not been competitively contracted. For example, San Diego began contracting in 1979, and as a result of the PEP Policy has converted 38 percent of its bus system to competitive

contracting at an average cost saving of 30 percent. ‘‘Ripple effect’’ savings have

reduced the costs of noncompetitive service by 25 percent per vehicle hour. In fact,

through 1996, as a result of competitive contracting, San Diego system-wide bus

costs per vehicle hour were $475 million less than if costs had risen at the industry rates experience by those agencies that do not contract.

• Private sector contractors pay local, State, and Federal taxes and the taxes paid

by private operators benefit the public good.

There are numerous examples in addition to San Diego Transit where the impetus

of the FTA PEP Policy resulted in innovative services utilizing private operators.

A few follow below.

• In Phoenix, AZ, the transit agency saved a significant amount of money by eliminating Sunday bus service and replacing it with a shared-ride taxi service.

• Ann Arbor Area Transit Authority eliminated its late night bus service and replaced it with a shared-ride taxi service.

• Transit Authorities in Dallas and Houston expanded service to growing suburban

areas by contracting for express bus service.

• Denver Regional Transit District is required by State law to contract-out 35 percent of its fixed-route service, which it does at cost savings of 41 percent.

• Indianapolis contracts 70 percent of its bus system experiencing a cost per hour

reduction of 22 percent.

• The city of Las Vegas contracts-out its entire system. Costs per vehicle hour

dropped by 33.3 percent.

• Foothills Transit outside Los Angeles, contracts-out its entire system to private

operators. Its ridership has risen by over 50 percent, it has added 57 percent more

service, and its fares have dropped by 37 percent.

An often-quoted fallacy is that the savings to the transit agency are because the

contract workers are paid a lower wage that the public transit employees. However,

studies have shown that the lower contractor costs result from administrative efficiencies, improved management of the workforce, more productive work rules, better

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utilization of equipment and facilities, improved maintenance practices, and labor

compensation consistent with competitive market rates.

Rescission of the PEP Policy

In 1993, in the early days of the Clinton/Gore Administration, a great deal of Administration governmental reform policy was based on a book entitled ‘‘Reinventing

Government’’ by David Osborne and Ted Gaebler. The book specifically cited the

FTA Private Enterprise program for its efforts to achieve competition and efficiency

in the delivery of government services. In a letter protesting the rescinding of the

PEP Policy by the Clinton Administration, Osborne stated, ‘‘I believe the Private

Enterprise Policy is indeed a model program. It simply requires local authorities to

determine and consider the alternatives, public and private, in reaching transit

objectives.’’ He continued, ‘‘The injection of competition into public monopolies is a

fundamental principle not only of ‘‘Reinventing Government,’’ but of the Administration’s National Performance Review, run by Vice President Al Gore. I serve as a

Senior Adviser on the Performance Review. We are actively trying to increase, not

decrease, the amount of competition in Federally funded services.’’ Osborne’s words

fell on deaf ears. The PEP Policy was rescinded. Since the rescission of the PEP

Policy in 1994, there have been no significant incentives to continue the more effective use of resources that result from the consideration of competitive contracting

in the provision of public transportation.

TLPA LEGISLATIVE PROGRAM TO REVITALIZE THE PARTICIPATION OF PRIVATE

TRANSPORTATION

Providers to the Planning and Delivery of Public Transit Services

The infusion of competition into the provision of public transit services is important for a number of reasons including: (1) the need to guard against inequitable

Government subsidized competition, (2) to guarantee efficiency and effectiveness in

the expenditure of Federal mass transportation assistance through competition, and

(3) to prevent duplicative expenditures. The following five legislative initiatives are

designed to increase the participation of private operators to the maximum extent

feasible as is called for in the statute.

Repeal the Anti-Private Sector Federal Transit Planning Certification Provision

The Planning Program provisions applicable to transit and metropolitan planning

agencies are found in Section 5303–5306 of Title 49 United States Code—Transportation. Section 5306(a) states: ‘‘A plan or program required by Section 5303, 5304,

or 5305 of this Title shall encourage to the maximum extent feasible the participation of private enterprise.’’ Under Section 5306(c), the private enterprise participation requirements are defined as:

• Section 5306(c)(2) requires each recipient of a grant shall develop, in consultation

with interested parties, including private transportation providers, a proposed

program of projects or activities to be financed;

• Section 5306(c)(3) requires each grant recipient to publish a proposed program of

projects in a way that affected citizens, private transportation providers, and local

elected officials, have the opportunity to examine the proposed program and submit comments on the proposed program and the performance of the recipient;

• Section 5306(c)(6) requires each grant recipient to consider comments and views

received especially those of private transportation providers in preparing the final

program of projects.

Unfortunately, the experiences of private operators with transit agencies and Metropolitan Planning Organizations (MPO’s) for the past 12 years under ISTEA and

TEA–21 are that these private enterprise participation provisions are being ignored,

because Section 5305(e)(3) of the Title states that:

The Secretary may not withhold certification [that each metropolitan planning organization in each transportation management area is carrying out

its responsibilities under applicable laws of the United States] based on the

policies and criteria a metropolitan planning organization or mass transportation grant recipient establishes under Section 5306(a) of this Title for deciding the feasibility of private enterprise participation.

Section 5305(e)(3) discriminates directly against private transportation operators.

The power and role of MPO’s were greatly enhanced with the enactment of ISTEA

in 1991 and even more so with the enactment of TEA–21 in 1998. In the transit

portion of TEA–21, the MPO is required to be certified at least every 3 years, and

it has to certify that it complies with all applicable laws and regulations except one.

That one exception is the private sector provision of the Federal Transit Act.

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This anticompetitive, antiprivate sector provision should be repealed from the

Federal Transit Act because the only sections of the Act that save the taxpayers’

money are the Private Sector provisions of the statute that require grant recipients

to consider the utilization of the private sector in the provision of public transit

service. In addition, the enforcement of Section 5305(e)(3) effectively neutralizes the

private sector participation requirement and removes the likelihood that the MPO

will make a decision that allows for competition in public transit.

After the passage of TEA–21, the Federal Transit Administration and Federal

Highway Administration issued a memorandum on how their field offices should

proceed with the planning requirements of the law. The document serves as a reminder to transit operators, State DOT’s, and Metropolitan Planning Organizations

to ensure a basic level of compliance with TEA–21’s statutory language. There are

eight requirements covered in the memorandum including the following:

Consultation with transit users and freight shippers and service providers:

‘‘Before approving a long-range transportation plan, each metropolitan planning organization shall provide citizens, affected public agencies, representatives of transportation agency employees, freight shippers, providers of

freight transportation services, private providers of transportation, representatives of public transit, and other interested parties with a reasonable opportunity to comment on the long-range transportation plan, in a

manner the Secretary deems appropriate.’’ (Emphasis added)

The law mandates a role for the private sector, yet at the same time, Section

5305(e)(3) explicitly withdraws any enforcement of the mandate. By hiding behind

Section 5305(e)(3), many agencies do not consider the role the private sector could

play in improving the quality and cost effectiveness of transportation services in

their area. The study published by the Transportation Research Board in 2001,

‘‘Contracting for Bus and Demand-Responsive Transit Services’’ reported that 40

percent of all Federal transit aid recipients do not currently contract at all. The Administration’s Reauthorization bill repeals this antiprivate sector Federal transit

planning certification provision. We urge that the Senate’s reauthorization bill also

repeal this provision.

Amend DOL Administration of the Federal Transit Labor Protection Provisions

In April 2001, the House Subcommittee on Highways and Transit of the Committee on Transportation and Infrastructure heard testimony from Anthony Downs,

a Senior Fellow at the Brookings Institution who was asked to provide a report on

the ‘‘Future of U.S. Ground Transportation from 2000 to 2020.’’ In his testimony,

Downs stated:

To a great extent, two types of archaic institutional structures hamper approaching future ground transportation rationally and efficiently. First,

existing means of governance in most metro areas are not capable of managing regional growth so as to create consistently higher densities in newgrowth areas . . . The second major institutional roadblock lies in the regulations that govern public transit. Existing authorities bolstered by transit

unions want to maintain monopolies of very inefficient large-scale systems

that cannot achieve flexible approaches to serving low-density residential

areas. Yet such areas will comprise the vast majority of all new areas we

are likely to build in the next two decades. . . Imaginative management of

public transit funds would encourage bidding for new types of services by

private entrepreneurs. But the political power of transit unions and established institutions makes that unlikely. . .’’ (emphasis added)

Mr. Downs is not the first learned individual to recognize the role unions play in

stifling innovation in public transit because of the hold Section 5333(b)—transit

labor protection (formerly Section 13(c)) gives them over transit agency management. Section 5333(b) adversely impacts transit operations in a variety of ways, but

two are of particular concern to private operators, including paratransit operators:

• Restrictions on delivering transit services in a manner that makes the most business sense, particularly the roadblocks that 5333(b) present to any legitimate

competitive contracting efforts; and

• Financial liability for 5333(b) claims, often in connection with changes in contractors, regardless of whether the action involved has any real connection to a Federal project or grant.

Private operators’ concerns about Section 5333(b) arise not out of its original intent, but rather out of how it has evolved and been expansively interpreted by the

Department of Labor over the years. As the legislative history reflects, the original

Section 13(c) was designed by Congress to protect transit workers from adverse

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impacts in employment that might result from Federal grants and to protect the collective bargaining rights of employees of private transit companies when those companies were purchased by public entities with Federal funds. Clearly, given these

Congressional objectives, Section 5333(b) has been interpreted and applied far beyond its original intent. Transit operators are being repeatedly frustrated in their

efforts to provide additional and cost effective transit for the people they serve due

to the threat of labor protection impediments and costs. Some unions have used Section 5333(b) to block contracting action, and to impose large costs that reduce or

eliminate the efficiencies in contracting for services. In April 2001, this Subcommittee heard testimony from public transit officials representing Sacramento,

Little Rock, Las Vegas, Boston, New York, and Chicago—six dissimilar cities, but

all burdened and asking for relief from the Section 5333(b) labor protections. Peter

Stangl, Chairman and CEO of the New York Metropolitan Transit Authority,

summed up the concerns of these six public transit representatives by stating:

‘‘Current labor protection requirements, the ‘‘13(c)’’ provisions of the Federal Transit Act, apply to both capital and operating budgets. A grant recipient’s union must approve both our capital and operating assistance

requests before FTA can proffer grants. Such sign-off provisions give extraordinary control over a transit organization to the unions and can be

used to undermine more traditional channels for resolving labor/management disputes. The net effect of 13(c) is to deprive transit operators of the

ability to achieve reasonable productivity. Most critically, the regulations do

nothing to advance legitimate Federal interests.’’

The scope and nature of the 5333(b) protections required in ‘‘change in contractor’’

cases have continued to be a subject of major debate. The Department of Labor has

become increasingly sympathetic to the efforts of the transit unions to include in

5333(b) protections a requirement that contractors providing transit services for a

Federal grantee hire the workforce of the preceding contractor, and adopt the terms

of the existing collective bargaining agreements. The provisions sought essentially

provide a guaranteed right of continued employment, a ‘‘carryover’’ of the then-effective collective bargaining agreement, and if read literally, recognition of the existing

union representative.

Compounding the difficulty with the Department of Labor’s position is the fact

that FTA grantees are faced with inconsistent, and sometimes directly conflicting,

imperatives from the Federal agencies that play a major role in their funding. Specifically, grantees are being told by the FTA that they must conduct periodic competitive procurements for transit services and award to the successful proposer

under FTA’s procurement principles; only then to be told by the Department of

Labor that they cannot take any action that would change the existing workforce

or their unions. These conflicting Federal directives cannot be reconciled, leaving

grantees in the untenable position of trying to decide which agency to believe and

whose rules to follow.

A required carryover could have a significant adverse impact on contracted services in the paratransit area. In particular, the potential economic benefits of competitive contracting could be lost if labor costs are effectively ‘‘locked in’’ from one

contractor to the next.

The Department of Labor had previously held that when a contract for a fixed

length has been properly terminated in accordance with its terms, impacts which

occurred solely as a result of the expiration of the bid contract were not to be considered ‘‘as a result of’’ a Federal grant, and thus would not give rise to 5333(b) protections for affected employees. One major exception to the general rule was where the

applicable 5333(b) protections already in place explicitly required the carryover of

employees and/or the collective bargaining agreement.

The transit labor unions have been more aggressively pursuing 5333(b) provisions

requiring a carryover of the workforce and collective bargaining agreement, both in

the context of negotiation over the terms to be included in 5333(b) agreements and

in the form of 5333(b) claims filed under applicable existing 5333(b) protections.

Section 5333(b)’s roots can be traced back to late 19th century rail labor law.

These protections basically provide that should a union member covered by a labor

agreement lose his or her job through the actions of a Federal grant, that union

member is entitled to compensation of up to 6 years full salary. This onerous penalty, once widespread across the United States, now only applies to two industries:

Amtrak and public transit.

Following are four core actions for how Section 5333(b) labor protection provided

for in the Federal Transit Act can be effectively changed to make the transit labor

protections less of an obstacle to the efficient and effective provision of public transportation service.

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1. The carryover of workforce issue needs to be addressed in the Senate bill. This

could be achieved by simply declaring that a change in contractors is not an event

that gives rise to 5333(b) protections. In fact, a 1994 certification for the Regional

Transportation Commission of Clark County, Nevada, the Department of Labor

agreed with the grantee that ‘‘neither Section 13(c)(1) nor (c)(2) provide guaranteed

jobs, but rather ensure that rights achieved through collective bargaining with an

employer are preserved and that the process for negotiating labor contracts is continued with the employing entity.’’ The Department of Labor went on to state that

13(c)(1) and (c)(2) ‘‘standing alone do not operate to create new employment relationships with a third party, nor do they require the hiring of a predetermined

workforce.’’

2. The Department of Labor’s previous position that there is not a required carryover of workforce should also extend to ‘‘public to private’’ transitions where no employees are dismissed as a result of a Federal project. Without such a declaration

the universe of situations in which a carryover of a workforce and its labor contract

will be required can continue to expand. Such expansion will have a significant

impact on transit systems that rely on private contractors for their paratransit operations, and could have a significant impact on the private contractors’ ability to provide such operations, and even on their willingness to contract with public transit

operators to provide such service.

3. Some FTA grantees have objected to binding interest arbitration provisions in

5333(b) agreements. The Department of Labor has found such objections ‘‘insufficient,’’ and in effect have frustrated attempts by grantees to use different forms of

dispute resolutions (such as fact finding) for interest disputes other than binding

interest arbitration. The Department’s action to deny the objections to interest arbitration is in direct conflict with judicial precedent, which has clearly held that interest arbitration is not a required provision of 5333(b) terms. ATU v. Donovan 767

F. 2d 939 (D.C. Cir. 1985). By denying grantees’ ability to object to interest arbitration, grantees continue to be bound to interest arbitration that need not be legally

included in 13(c) provisions. Recent efforts to bind contractors to the 5333(b) terms

of grantees, would likewise require contractors to be subject to binding arbitration

in interest dispute with their workforce.

4. It is suggested that the review of all FTA grants should be limited to the review

by the Federal Transit Administration. There is no statutory requirement that these

grants should be reviewed by the DOL, and therefore, the practice should be statutorily ended. Transit labor protection was enacted with the implementation of the

Federal Transit Act in 1964 and the subsequent regulations that were promulgated

over the years resulted in Federal transit grants not only being reviewed by the

DOT, but eventually by the DOL. Currently, ALL Federal transit grants are not

only reviewed by the DOL, but also those grants are actually reviewed by private

entities that have veto power, the national union organization that would be applicable to that particular public transit authority.

We believe implementation of these recommendations would go a long way toward

bringing a more level playing field to the competitive bidding process at many transit agencies. We urge the Senate to include language requiring these changes in the

reauthorization legislation.

Need For Private Participation Requirements

There is ample, indisputable evidence that the Private Sector Participation Guidance, developed and promoted by the Reagan and Bush Administrations, was a

great success raising the amount of contracting, in just 10 years, from $10 million

per year to over $500 million per year. Public transit agencies, private operators,

local governments, and most importantly, the public itself can realize significant

benefits from contracting some public transportation services to private operators.

• Benefits for the riding public include increased levels of transportation services,

increased convenience, and improved service quality.

• Private operators typically realize increased income, productivity, and exposure in

their communities.

• Benefits for public transit agencies typically include cost savings, the ability to

serve a greater number and types of trip needs, and allow a more productive allocation of union labor.

• Local governments typically realize cost savings and a higher level of public transit services.

However, since the rescission of the Reagan-Bush Private Enterprise Participation

policies in 1994 by the Clinton Administration, the private sector has been relegated

to the back burner and is not even an afterthought in the minds of many transit

and government officials.

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• Currently, 40 percent of all public transit agencies do not contract any services.

Even though there is a legislative requirement to utilize private operators to the

maximum extent feasible, a very alarming 30 percent of these transit agencies

are led by general managers who state unequivocally that they never consider

contracting. • Only three of the Federal Transit Administration Regional Administrators were

regional administrators when the guidance was in place, so even high-placed FTA

officials have basically dropped private operators from their purview. It has been

many years since FTA officials have been instructed to assure consideration of the

private sector in leveraging public transportation investment and to assure cooperation, not unfair subsidized competition, in the efficient use of Federal transit

grants. • After FTA rescinded the Private Enterprise Participation Policy, it withdrew the

private sector guidances for its Capital Program, Urbanized Area Program, Nonurbanized Area Program, Elderly and Persons with Disabilities Program, and its

Competition Policy for Paratransit Activities. As the years have passed and new

employees have come into transit management positions, consideration of private

operators for contracting purposes is ending. Just as consideration of private operators was virtually nonexistent for 20 years after the Federal Transit Act of 1964

became law (until the Private Enterprise Participation Policy was introduced in

1984); utilization and even consideration of the private sector is now declining.

Also, many States have revised their guidance to operators and dropped private

sector inclusion in the planning process as a result of FTA backing away from enforcing the private sector provisions in the Federal Transit Act. • While it is true that the requirements of providing complementary paratransit

service required by the ADA has increased the dollar volume of contracted transit

services, the trend is for transit agencies to take contracts back in-house. Altogether, contractors provide about 15 percent of all bus and demand-responsive vehicle hours, a percentage that has changed very little during the past 5 or 6 years. • Currently, the President’s Management Agenda (PMA) promotes contracting and

outsourcing as a means to bring private sector efficiencies into the Federal Government. Re-establishing a private sector participation policy would help FTA and

DOT meet the PMA requirements.

The public private partnership approach to providing transit services is a proven

tool to achieve various public objectives including cost control, enhancements of

service quality and quantity, and access to capital funding. However, as there are

ever-increasing demands for limited transit funds, the competitive approach offers

a means to provide current or new services at a reduced cost utilizing the savings

for existing transit services. TLPA urges the Senate to require FTA to conduct a

rulemaking to reestablish a private sector participation policy. The end result would

be an increase in the efficiency and effectiveness of public transit operations in this

country.

Include the President’s New Freedom Program in the Senate Reauthorization Bill

President Bush has stated that his New Freedom Program is designed to close

the mobility gap for disabled Americans who currently do not have adequate mobility options so that these persons will have ‘‘the opportunity to participate fully in

society and engage in productive work.’’ According to Secretary of Transportation

Mineta, the New Freedom Program funds are intended to increase access to assistive technologies and educational opportunities, and to enhance the integration of

disabled persons into the workforce and communities. The Department of Transportation is charged with responsibility for the New Freedom Program funding, underscoring the central role of transportation in achieving the goals of the program.

Today, most public transit systems are largely accessible to disabled persons as

a result of public funding to meet the requirements of the Americans with Disabilities Act. However, the privately owned and funded taxicab and paratransit industry

receives virtually no public funding to provide service to the disabled. At the same

time, private operators provide an essential means of transportation for people in

urban, suburban, and rural areas. The industry is used on a curb-to-curb basis, to

reach other transportation facilities such as bus and rail stations and airports, as

well as workplaces, schools, doctors, community centers, and other locations. Taxicabs are ubiquitous, operating in over 2,000 communities and providing demand-response service 24 hours per day, 365 days per year. For many people, the disabled

included, taxicabs provide the essential link between home, the community at-large,

and other transportation systems. Taxicabs are more broadly available than municipal paratransit services, which are generally available only with advance reservation, for limited hours and then only in city centers and in areas three-quarters of

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bility for a larger number of disabled persons could easily be achieved, consistent

with the goals of the ADA, were New Freedom Program funds made available to

carry out a program designed to close the mobility gap with respect to critically

important curb-to-curb transportation provided by the private taxicab and paratransit industry. The program, which would be administered by the Federal Transit

Administration, would authorize funding to qualified organizations (community

groups or directly to taxicab companies) for use in enhancing local transportation

services for disabled persons by working with private taxi-van providers to fund the

purchase, promotion, and operation of taxi-vans that meet Federal accessibility requirements for vans and that serve persons requiring accessible transportation to

reach work, schools and other places in the community at-large. The Administration’s Reauthorization bill calls for the program be modeled on FTA’s Job Access and

Reverse Commute Program, that is projects must be derived from a locally developed, coordinated public transit-human services transportation plan that is developed through a process that includes representatives of public, private, nonprofit

transportation, human services providers, and representatives of the general public.

The New Freedom Program could establish an immediate and meaningful accessible transportation safety net, making 1 million accessible taxi-van trips available

per year. Assuming the program funded two-thirds of the incremental cost of acquisition and the first year of incremental operating costs, then for each $1.8 million

in funding, approximately 125 additional accessible taxi-vans could be purchased

nationwide. These taxi-vans would dramatically increase the service area and hours

of availability of accessible transportation service. Each could reasonably be expected to be available to transport two wheelchair passengers per hour for about 12

hours per day, thereby collectively serving 1 million disabled passengers annually

who would not otherwise receive this. The U.S. Department of Labor estimates that

70 percent of employable people with disabilities are unemployed, 33 percent of

these people are attributing lack of adequate transportation as a key factor in their

inability to secure employment. The New Freedom Program, by creating an accessible transportation safety net in the form of taxi-vans, would be implementing a

public-private partnership to help integrate passengers with disabilities into the

workforce and community, thus expanding the transportation options for employable

people with disabilities.

The Administration’s reauthorization bill states, ‘‘subrecipient means a State or

local governmental authority, a nonprofit organization, or a private operator of public transportation service that may receive a grant under this section indirectly

through a recipient, rather than directly from the Federal Government.’’ TLPA

urges that the Senate include the New Freedom Program in their reauthorization

legislation and to use similar language to the Administration to ensure that private

operators are eligible to participate in the program.

Require that FTA’s Special Needs Programs (JARC, New Freedom, and Section

5310) Utilize the Same Planning and Eligibility Requirements

In the past 7 years, the Federal Transit Administration (FTA) has introduced or

proposed two innovative programs designed to meet the special needs of two of the

most transportation dependent groups: Those with low incomes and the disabled.

The Job Access and Reverse Commute (JARC) grant program is designed to transport welfare recipients and eligible low-income individuals to and from jobs and activities related to employment. President Bush’s proposed New Freedom Program

would provide for alternative transportation services to jobs and innovative solutions eliminating transportation barriers faced by persons with disabilities. Along

with the FTA Section 5310 Elderly and Persons with Disabilities Program, JARC

and the New Freedom Program are FTA’s special needs programs. Each one of these

programs has a slightly different target audience, JARC (unemployed and welfareto-work individuals); New Freedom (disabled individuals whose needs cannot be met

by Americans with Disabilities Act accessible transportation options); and Section

5310 (assisting private nonprofit groups and certain public bodies in meeting the

transportation needs of elders and persons with disabilities). However, there are

such similarities and potential synergies among the programs, that TLPA urges that

the Senate require that each program be required to have uniform planning and eligibility requirements using the JARC planning and eligibility requirements as the

guidelines. This request is also consistent with the renewed emphasis on coordination of transportation resources at the Federal level.

The issue of providing affordable, accessible, and safe transportation for human

services clients has been extensively researched and promoted since the early

1970’s. In October 1986, Secretary of the U.S. Department of Health and Human

Services Otis Brown and Secretary of the U.S. Department of Transportation Elizabeth Dole signed a historic joint agreement on the coordination of transportation

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services funded by the two agencies. Every subsequent Administration has renewed

this commitment to coordination. In the past 17 years, the scope and reach of coordinated transportation services has advanced to such an extent that one can find exemplary models of coordinated activities in virtually every State. However, recent

changes in Federal social service programs principally the change from serving children’s needs in the Aid to Families with Dependent Children program to serving

the entire family’s needs in the Temporary Assistance to Needy Families (TANF)

program; difficulties in funding medical services, primarily the financial dilemmas

States are facing with the Medicaid program; and changes in the demographics of

our country, chiefly the increasing proportion of our population age 65 and over,

have fostered a renewed need for and commitment to coordination at the Federal

level. The Administration’s reauthorization bill requires any locality applying for

funding for any of the three programs (NFI, 5310, & JARC) must demonstrate that

they have a local, coordinated process that includes all the stakeholders: Public and

private operators, local governments, private nonprofit organizations, and riders.

Having a seat at the table should give private operators an enhanced role in helping

plan for and provide coordinated services. TLPA supports having one streamlined

program that has uniform planning and operating requirements for recipient and

subrecipient grantees.

The importance to private operators of having uniform planning and participation

requirements for these special needs programs cannot be overstated. The Federal

Transit Act requires that planners and grant recipients ‘‘shall encourage to the maximum extent feasible the participation of private enterprise.’’ However, because private operators are not accustomed to Federal planning and procurement processes,

having to deal with different requirements for each and every program is often mind

numbing. By including language in their reauthorization legislation requiring that

FTA’s three special needs programs utilize uniform planning and participation requirements, the Senate would further advance the private enterprise participation

requirements of the Federal Transit Act.

Conclusion

Competitive contracting is a tool that is available to public transit agencies to assist them in managing their costs in these current economic times where virtually

every State and locality is scrambling for dollars to overcome budget deficits. Competitive contracting not only results in lower cost for public services that are competitively contracted, it also induces improved cost performance from the public

agency. Contractors are the friends of the public transit sector. They take over the

least productive routes and usually deliver a comparable or better quality of service

at a lower deficit rate. There is little evidence of any significant economies of scale

in the transit industry, particularly for large transit agencies, meaning there is no

real economic justification for protecting transit properties from competition. Research shows consistently that unit costs of delivering bus services rise when vehicle

miles increase. Thus, private firms that assist in serving high-deficit peak loads

should help reduce the scale of public operations to a more cost-efficient level.

TLPA respectfully requests that the Senate consider including the Association’s

five legislative proposals in their transportation reauthorization legislation. Thank

you for this opportunity.

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STATEMENT OF THE NATIONAL SCHOOL TRANSPORTATION

ASSOCIATION

JULY 23, 2003

The National School Transportation Association (NSTA) is the national trade association for private school bus companies that contract with school districts to

provide pupil transportation. We offer a full range of services to our school district

partners, including: routing; driver training; vehicle maintenance; student safety

training; dispatching and operations; and transportation both to and from school

and to extracurricular activities. Our members range from small family-owned operations with fewer than five buses to large corporate entities operating thousands of

buses in multiple States, all of which are committed to ensuring the safety of the

students they transport.

Private school bus companies operate more than 150,000 yellow buses, of the

nationwide fleet of 460,000 school buses and many of these companies operate in

areas not served by public transit. These vehicles, and their drivers, are underutilized: They are idle for many hours of the weekday and weekends throughout the

school year, and are available at most times during the summer. Contractors offer

not only the vehicles and personnel to operate them, but also expertise in safely and

effectively transporting passengers day in and day out, including passengers with

disabilities. Contractors also provide operations management and financial management capabilities, as well as planning, scheduling, routing, training, safety, and vehicle maintenance expertise.

Public transit agencies must meet the challenge of serving increasing numbers of

people, particularly those who require transportation service on an as needed basis

rather than through regularly scheduled fixed-route services. Human service agencies must provide transportation to their constituents that is only ancillary to the

primary services they are mandated to deliver, yet this service is of such importance

that these agencies must spend an ever-increasing portion of their limited resources

allowing their clients to take advantage of those primary services. Many people fall

through the cracks between available public transit service and human services

agency transportation, remaining entirely without service. These individuals are not

part of a constituency served by any particular human services agency in their community, and public transportation is either unavailable or cannot be expanded to

accommodate them because of the financial constraints of either the public transit

agency or the community. As a consequence, significant numbers of people requiring

transportation services simply cannot access such service. Yet in communities

throughout the United States, a valuable resource often sits idle while agencies look

for new resources to meet their growing needs.

Many agencies have successfully subcontracted work to private school bus contractors with vehicles available during nonschool service time, yet this is not a widespread practice. Neither public transit nor human service agencies are required to

consider contracting for transportation services. Furthermore, agencies are offered

no incentives to use available school buses as an option to save money and maximize resources while providing transportation to those not receiving it.

Public school districts throughout the Nation utilize private school bus companies

because they are able to provide a cost effective alternative or supplement to district-operated transportation systems, allowing school administrators to conserve

scarce resources. Similarly, transit and human resource agency administrators could

benefit from contracting with local private school bus operators to fill their unmet

service needs without acquiring additional costly equipment or personnel.

Public policy rightly emphasizes mobility alternatives for the elderly and disabled

citizens. In addition, improved mobility and greater access to jobs improves the

quality of life for all Americans. It is through the coordination of all transportation

resources that we are able to enhance the transportation alternatives available to

every citizen. Utilizing private school buses as part of a community transportation

system makes good fiscal sense and is operationally practical; unfortunately, many

agencies ignore the resources in their own back yard. We ask that Congress provide

the necessary incentives or directives to encourage both public transit agencies and

human resource agencies to consider contracting with school bus companies to provide needed services and maximize resources.

While NSTA supports the proposals in SAFETEA that reflect the Administration’s

efforts to enhance mobility by offering greater access to transportation through coordination of transportation resources, we are concerned about one section of the

bill. Section 3020 would amend the current Section 5323 by revising Paragraph (2)

to read as follows:

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‘‘(2) The Secretary may waive Paragraph (1) of this Subsection if the Secretary finds that the provision of school bus transportation by the applicant,

governmental authority, or publicly owned operator is necessary to meet

the transportation needs of students with disabilities.’’

This language amends current law, which prohibits school bus service by public

transit systems receiving Federal funding. Specifically, FTA grantees must agree

not to use vehicles or facilities that are subsidized by Federal dollars to compete

unfairly against private school bus companies that enjoy no such subsidy. This

SAFETEA provision would allow the Secretary to waive current law, under the apparent perception that the transportation needs of some disabled students are not

being met.

This perception is false. The Individuals with Disabilities Education Act (IDEA)

requires that schools provide transportation for every student with a disability if

transportation is necessary for the student to access his or her educational program.

Any school that does not provide proper and adequate transportation, including any

specialized equipment required by the student, is subject to sanctions from the Office of Specialized Education Programs (OSEP) or the Office of Civil Rights (OCR)

in the U.S. Department of Education. This requirement applies not only to transportation to and from school, but also to transportation necessary to allow the student

to participate in extracurricular activities with his or her nondisabled peers.

The proposed change also raises significant safety issues as transit and paratransit vehicles are not designed to the same safety standards as school buses, nor

are they subject to the same inspection standards. Further, the drivers of public

transit vehicles are not trained and licensed according to the standards of school bus

drivers to ensure the safe transportation of students with disabilities.

For decades, school districts have been providing specialized transportation for

students with disabilities using private school bus companies, and they will continue

to do so. There is no service gap that requires a change in the law. NSTA asks that

Congress reject this SAFETEA provision.

Thank you for the opportunity to testify before the Committee. If we can provide

additional information or service, please do not hesitate to contact our Executive Director, Jeff Kulick, at 703–684–3200.