<DOC>
[108th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:98605.wais]
HOW CAN WE MAXIMIZE PRIVATE SECTOR PARTICIPATION IN TRANSPORTATION?--
PART II
=======================================================================
HEARING
before the
SUBCOMMITTEE ON ENERGY POLICY, NATURAL
RESOURCES AND REGULATORY AFFAIRS
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 30, 2004
__________
Serial No. 108-277
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
______
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COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
DAN BURTON, Indiana HENRY A. WAXMAN, California
CHRISTOPHER SHAYS, Connecticut TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
DOUG OSE, California DENNIS J. KUCINICH, Ohio
RON LEWIS, Kentucky DANNY K. DAVIS, Illinois
TODD RUSSELL PLATTS, Pennsylvania JOHN F. TIERNEY, Massachusetts
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
ADAM H. PUTNAM, Florida DIANE E. WATSON, California
EDWARD L. SCHROCK, Virginia STEPHEN F. LYNCH, Massachusetts
JOHN J. DUNCAN, Jr., Tennessee CHRIS VAN HOLLEN, Maryland
NATHAN DEAL, Georgia LINDA T. SANCHEZ, California
CANDICE S. MILLER, Michigan C.A. ``DUTCH'' RUPPERSBERGER,
TIM MURPHY, Pennsylvania Maryland
MICHAEL R. TURNER, Ohio ELEANOR HOLMES NORTON, District of
JOHN R. CARTER, Texas Columbia
MARSHA BLACKBURN, Tennessee JIM COOPER, Tennessee
PATRICK J. TIBERI, Ohio BETTY McCOLLUM, Minnesota
KATHERINE HARRIS, Florida ------
MICHAEL C. BURGESS, Texas BERNARD SANDERS, Vermont
(Independent)
Melissa Wojciak, Staff Director
David Marin, Deputy Staff Director/Communications Director
Rob Borden, Parliamentarian
Teresa Austin, Chief Clerk
Phil Barnett, Minority Chief of Staff/Chief Counsel
Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs
DOUG OSE, California, Chairman
EDWARD L. SCHROCK, Virginia JOHN F. TIERNEY, Massachusetts
CHRISTOPHER SHAYS, Connecticut TOM LANTOS, California
JOHN M. McHUGH, New York PAUL E. KANJORSKI, Pennsylvania
CHRIS CANNON, Utah DENNIS J. KUCINICH, Ohio
NATHAN DEAL, Georgia CHRIS VAN HOLLEN, Maryland
CANDICE S. MILLER, Michigan JIM COOPER, Tennessee
PATRICK J. TIBERI, Ohio
Ex Officio
TOM DAVIS, Virginia HENRY A. WAXMAN, California
Barbara F. Kahlow, Staff Director
Lauren Jacobs, Clerk
Krista Boyd, Minority Counsel
C O N T E N T S
----------
Page
Hearing held on September 30, 2004............................... 1
Statement of:
Dorn, Jennifer L., Administrator, Federal Transit
Administration, U.S. Department of Transportation,
accompanied by D.J. Gribbin, Chief Counsel, U.S. Department
of Transportation, Federal Highway Administration; and
William Sears, Chief Counsel, Federal Transit
Administration............................................. 11
Tangherlini, Dan, director, D.C. Department of
Transportation, Washington, DC; Tom Mack, chairman,
Tourmobile Sightseeing, Washington, DC; Jerome Cooper,
chairman, Transit Alliance and president, Jamaica Buses,
Inc., Jamaica, NY; David N. Smith, director of marketing
and sales, Oleta Coach Lines, Inc., Williamsburg, VA; and
Steven Diaz, esq., former Chief Counsel, Federal Transit
Administration, Department of Transportation, Law Office of
Steven A. Diaz............................................. 50
Letters, statements, etc., submitted for the record by:
Cooper, Jerome, chairman, Transit Alliance and president,
Jamaica Buses, Inc., Jamaica, NY, prepared statement of.... 88
Diaz, Steven, esq., former Chief Counsel, Federal Transit
Administration, Department of Transportation, Law Office of
Steven A. Diaz, prepared statement of...................... 124
Dorn, Jennifer L., Administrator, Federal Transit
Administration, U.S. Department of Transportation, prepared
statement of............................................... 14
Gribbin, D.J., Chief Counsel, U.S. Department of
Transportation, Federal Highway Administration, letters to
Congressmen................................................ 41
Mack, Tom, chairman, Tourmobile Sightseeing, Washington, DC,
prepared statement of...................................... 77
Ose, Hon. Doug, a Representative in Congress from the State
of California, prepared statement of....................... 4
Smith, David N., director of marketing and sales, Oleta Coach
Lines, Inc., Williamsburg, VA, prepared statement of....... 110
Tangherlini, Dan, director, D.C. Department of
Transportation, Washington, DC, prepared statement of...... 53
HOW CAN WE MAXIMIZE PRIVATE SECTOR PARTICIPATION IN TRANSPORTATION?--
PART II
----------
THURSDAY, SEPTEMBER 30, 2004
House of Representatives,
Subcommittee on Energy Policy, Natural Resources
and Regulatory Affairs,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2154, Rayburn House Office Building, Hon. Doug Ose
(chairman of the subcommittee) presiding.
Present: Representatives Ose, Tiberi, Davis (ex officio),
Tierney, and Kucinich.
Staff present: Barbara F. Kahlow, staff director; Lauren
Jacobs, clerk; Megan Taormino, press secretary; Krista Boyd,
minority counsel; and Cecelia Morton, minority office manager.
Mr. Ose. Welcome to this morning's meeting of the Energy
Policy, Natural Resources and Regulatory Affairs Subcommittee.
Noting the presence of a quorum, I will call the meeting to
order.
Today, we are meeting on the subject of ``How Can We
Maximize Private Sector Participation in Transportation?'' I am
joined by the gentleman from Ohio, Mr. Tiberi. We are going to
go ahead and commence.
On May 18, 2004, this subcommittee held its initial hearing
on maximizing private sector participation in transportation.
Witnesses included the Department of Transportation, think tank
experts, and three adversely affected small business operators
of mass transit services. Today, we will focus on mass transit
and highways, and we will further explore DOT's record in
implementing the various statutory and regulatory private
sector participation requirements.
There are many advantages to participation by the private
sector in improving America's transportation system. For
example, infrastructure improvement projects can often be
completed more quickly and at reduced cost, transportation
services can often be delivered more cost-effectively, and
Federal and State funds can be devoted to other pressing needs.
In 1964, Congress began to enact laws to encourage private
sector participation in transportation. The 1966 law that
established Department of Transportation identified six reasons
for the cabinet-level department. The second reason was to
``facilitate the development and improvement of coordinated
transportation service to be provided by private enterprise to
the maximum extent feasible.'' DOT's implementing rules assign
primary responsibility for ``evaluation of private
transportation sector operating and economic issues'' to the
Assistant Secretary for Transportation Policy, who is
organizationally located within the Office of the Secretary.
In addition to laws requiring private sector participation
to the maximum extent feasible, Federal regulations support
this objective. For example, the governmentwide grants
management common rule provides that Federal grantees and
subgrantees ``must not use equipment acquired with grant funds
to provide services for a fee to compete unfairly with private
companies that provide equivalent services.''
I became especially interested in this subject in March
2003, when I learned of a public takeover of an over 25-year
competitively awarded contract for mass transit services in
Sacramento, California. Since then, I have found a number of
things. First, we have come upon unneeded expenditure of scarce
Federal funds, substantial in nature; second, we have come upon
noncompliance by a federally funded local transit grantee with
the Federal law requiring private sector participation to the
maximum extent feasible; and, third, we found inadequate
enforcement by the Department of Transportation. Now, after the
public takeover, in the city of Sacramento, peak hour bus
service is every 15 minutes, versus every 5 minutes prior to
the takeover, and the service costs 76 percent more, that being
over $150,000 per bus today versus just over $86,000 per bus
then.
In August 2003, I recommended two primary things: first,
that the Department of Transportation initiate a rulemaking to
ensure implementation of the statutory private sector
participation requirements and, second, that the Department of
Transportation take an appropriate enforcement action against
the noncompliant Federal grantee. To date, Department of
Transportation neither initiated a rulemaking, nor took an
enforcement action. DOT argued that it is a grant-making, not a
rulemaking agency, and it has a reduced enforcement rule.
However, DOT does have a fiduciary responsibility to assure
that Federal grant funds are expended in accordance with
Federal law.
Since my investigation of this case, I have learned of
additional cases involving federally funded grantee
noncompliance with existing Federal statutory or regulatory
protections. In some cases, the Department of Transportation
has not enforced its own rules and, as a result, allowed local
transit authorities to compete unfairly with existing private
mass transit service providers. In another case, the New York
City Council stated that a proposed takeover by a local transit
agency of franchised private sector bus services ``potentially
make the City responsible for paying hundreds of millions of
dollars in transfer costs arising from necessary purchases of
infrastructure.''
Our witnesses today include the Department of
Transportation, current and former expert public officials, and
three additional adversely affected small business operators of
mass transit services. Small businesses remain the backbone of
our economy. Congress wants and Americans deserve a reliable
and cost-effective transportation system, and one that does not
harm existing small business operators of transportation
services and does comply with the private sector participation
requirements first laid out in 1964 in the Urban Mass Transit
Act.
I want to welcome our witnesses today. They include
Jennifer Dorn, the Administrator of the Federal Transit
Administration; Dan Tangherlini, the Director of the District
of Columbia Department of Transportation; Tom Mack, Chairman of
the Tourmobile Sightseeing operation here in Washington, DC;
Mr. David Smith, the director of marketing and sales at Oleta
Coach Lines in Williamsburg, VA; Jerome Cooper, the chairman of
Transit Alliance and president of Jamaica Buses, Inc., Jamaica,
NY; and Mr. Steven Diaz, esq., former Chief Counsel for the FTA
and the Department of Transportation.
In addition to these individuals, Ms. Shirley Ybarra,
president of the Ybarra Group and Council Member for the
National Council for Public-Private Partnerships, and former
commissioner of the Virginia Department of Transportation,
accepted our invitation to testify on September 29th but is
unavailable for today's rescheduled hearing. Therefore, her
testimony will be made part of today's hearing record. Last, we
invited Iris Weinshall Schumer, commissioner of the New York
City Department of Transportation, to testify, but she declined
to do so.
[The prepared statement of Hon. Doug Ose follows:]
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Mr. Ose. I want to recognize the gentleman from Ohio for
the purpose of an opening statement.
Mr. Tiberi. Thank you, Mr. Chairman. It is my intent not to
have an opening statement today. We have a number of panelists;
I look forward to hearing from them and asking them questions
once their testimony is done. Thank you, Mr. Chairman.
Mr. Ose. I thank the gentleman. As usual, he is brief and
to the point.
Our practice here, as reflected in committee rules, we
swear in all of our witnesses. Whether you are an
administration, business, or small business witness, what have
you, we subject you to the same regiment across the board. So,
our first panel today is Ms. Jennifer Dorn, who is the
Administrator for the Federal Transit Administration at U.S.
Department of Transportation. The others that I mentioned will
be on our second panel.
Ms. Dorn, if you would please rise and raise your right
hand.
[Witness sworn.]
Mr. Ose. Let the record show the witness answered in the
affirmative.
Our normal practice here is that, having received your
written testimony, we invite you to share with us the
highlights in summary form. We are going to recognize each of
our witnesses on each of the panels for a period of 5 minutes
to do that. Ms. Dorn being the only witness on today's panel,
we might give you 5\1/2\ minutes, but we are going to be pretty
sharp on the clock. So, thank you for joining us today. You are
recognized for the purpose of a summary of your statement.
STATEMENT OF JENNIFER L. DORN, ADMINISTRATOR, FEDERAL TRANSIT
ADMINISTRATION, U.S. DEPARTMENT OF TRANSPORTATION, ACCOMPANIED
BY D.J. GRIBBIN, CHIEF COUNSEL, U.S. DEPARTMENT OF
TRANSPORTATION, FEDERAL HIGHWAY ADMINISTRATION; AND WILLIAM
SEARS, CHIEF COUNSEL, FEDERAL TRANSIT ADMINISTRATION
Ms. Dorn. Thank you, Mr. Chairman. Thank you for the
opportunity to discuss with you and members of the committee
how we can work together to increase private sector
participation in public transportation. I do appreciate the
committee's interest in and vigorous pursuit of private sector
participation in America's transportation network. This
administration strongly supports increased involvement of the
private sector in the transportation arena, and I am proud of
this administration's actions to date and the proposals that we
have submitted to Congress support that.
Over the last 3\1/2\ years, FTA has pursued our goal of
increasing private sector participation through a number of
strategies, including increasing private sector opportunities
to deliver services, promoting private sector involvement,
reducing administrative barriers to private sector service
delivery, and contracting and advocating statutory changes that
will help increase private sector involvement in transit.
In November 2002, I asked approximately 75 representatives
of private sector operators, transit agencies, and union
representatives to spend a day with me and our senior staff to
develop an action plan, what we believe to be a win-win
proposal to deliver more public transportation to the American
people through collaborations between the public and the
private sectors. That group, over half of whom represented
private sector operators, came to a consensus on a number of
the most important things that could be done to support private
sector involvement in transportation. Among other things, they
agreed that, at the Federal level, we should focus on the
following four items:
Since the primary objective of private sector involvement
should be to maintain and grow ridership, performance awards
should be developed for private and public operators to grow
ridership. The administration's reauthorization proposal
reflects that.
No. 2, there should be Federal leadership in education and
proliferation of best practices, including procurement, cost
models for fair and auditable cost comparisons, and contract
administration. Thus, in the procurement arena FTA has
undertaken a number of measures that this group had suggested
to eliminate unnecessary rules and restrictions, while
affording grantees maximum flexibility to make sound business
judgments based on more than simply low bid.
There has been a renewed emphasis on ensuring sound grantee
procurement practices. We have revised our procurement circular
to the benefit of all of our stakeholders, we have issued best
practices, and, with the strong support of both public and
private stakeholders who recognize that we need to have more
involvement of both sectors in order to have a fulsome
transportation provision for this country.
Third, there was the view that there should be Federal
neutrality in the choice of providers. FTA should not, in its
policies and practices, favor either private sector providers
or public sector providers; and, in order to ensure that
transit operators operate in a transparent manner, which was
the concern of private sector operators, and to help everyone
understand the rules, we have developed, published, and
distributed, a plain English brochure that explains the rules
with regard to charter services. We are in the process of
developing and will soon publish and distribute a similar plain
English brochure that explains the rules with regard to school
bus operations, and we are distributing those nationwide to
private sector operators, public sector operators as well.
The fourth area of focus by this group that we convened
suggested that potential competitive contracting should really
focus on new services and services based on new technologies.
We took that advice seriously as well, and we are working very
hard across departments to ensure that new opportunities for
transportation services are available to the private sector,
especially in the growing arena of human service program
transportation services and paratransit services. Conservative
estimates put this market for paratransit services at over $5
billion annually, with over 70 percent of those services
provided by the private sector.
Mr. Chairman, given the regulatory and legislative history
surrounding the private sector involvement issue, the
requirements for private sector participation are not easily
tracked by our stakeholders; they are scattered, indeed, in a
variety of laws, regulations, circulars, technical assistance,
guides and other materials published for each FTA program. And,
while I continue to believe that a revamping of our regulations
and circulars should be undertaken only after the surface
transportation laws are reauthorized, I also believe that we
can do a better job of explaining the current requirements to
all stakeholders.
Therefore, I have asked FTA's general counsel to develop a
user-friendly guide to private sector involvement requirements
for use by planning agencies, transit agencies, and private
sector transportation providers. I expect the document to again
explain in plain English what the requirements are, how they
are enforced, what sanctions may be applied under what
circumstances, and what recourse is available to private
parties who believe they have not been afforded the
opportunities provided in law. We will make every effort to
complete this document and circulate it for comment in the next
90 days.
Again, Mr. Chairman, I appreciate your continued interest
in and concern about protecting private sector transportation
operators from unfair competition. I assure you that I will
handle any such matters identified by or brought to FTA for
resolution fairly and in accordance with the applicable laws
and regulations, as I have sought to do in the past. Thank you.
[The prepared statement of Ms. Dorn follows:]
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Mr. Ose. Thank you, Ms. Dorn.
We are joined by my good friend from Massachusetts, Mr.
Tierney, who I am going to recognize for the purpose of an
opening statement.
Mr. Tierney. Thank you, Mr. Chairman. I will be brief. I
know that today's hearing is going to focus on private sector
participation in transportation, and I think private operators
play an important role in providing that transportation
throughout the country. That includes private transit operators
who, just like their public counterparts, provide much of the
needed transportation for commuters, students, and passengers.
There is, however, a decision as to whether and how often
local systems should use private operators, and it is not a
decision that should be made by the Federal Government, in my
view. Transit systems are inherently local, and the decisions
about using public or private operators I think should also be
local. State and local officials should have the freedom to
choose transit operators based on factors like safety, service
needs, reliability, and quality of services.
Particularly in light of Congress's attention this week on
the recommendations of the 9/11 Commission, an important issue
we should be addressing is how we can improve the safety of
mass transit. The 9/11 Commission's report points out the
vulnerabilities of service transportation systems, and I am
interested in hearing from the witnesses testifying today their
thoughts on what needs to be done to improve transit safety.
I also, Mr. Chairman, ask unanimous consent that the
hearing record be held open for 10 days so that the American
Public Transportation Association can submit information to be
included in the record.
Mr. Ose. Without objection.
Mr. Tierney. I thank you, Mr. Chair, and yield back.
Mr. Ose. I thank the gentleman.
I am pleased to recognize the gentleman from Ohio for the
purpose of an opening statement.
Mr. Kucinich. I want to thank the Chair for holding this
hearing and just say that mass transit in our major cities is
no small matter. Many people who are transit-dependent depend
on the decision of this Congress to help make sure that those
systems are intact. So, any decisions that are made by this
committee and by the Congress with respect to providing for
greater participation of the private sector in transportation
needs to be scrutinized very carefully with respect to service,
reliability, the cost. I appreciate the fact that the Chair is
willing to go into these issues. Thank you.
Mr. Ose. I thank the gentleman for his opening statement.
Our normal practice is we go to rounds of 5 minute
questions. One of the curious things about Congress is we all
have multiple commitments, so, if you see Members get up and
leave and come back and leave and come back, that is ordinary
business around here. So, bear with us as we struggle through
that.
I think given my friend's time constraints, I am prepared
to allow you to go first, if you want. Mr. Tierney for 5
minutes.
Mr. Tierney. Thank you for that courtesy; I appreciate it.
Ms. Dorn, thank you. As you noticed from my opening
statement and from questions that I asked Assistant Secretary
Frankel last May when he was here, I raised the point whether
local transits are, I think, local, and so I think they should
be the ones to decide what their needs are. I ask, don't you
think that the ones that make the decisions on how to run their
transit operations should also make the decision on whether to
use public or private transit sector people?
Ms. Dorn. Certainly the historic approach to transportation
in this country has been the view that there is a Federal
responsibility to assist in providing funds for necessary
transportation. Decisions about what kind of transportation and
where it should be located have been relegated to the local
authorities and local decisionmaking process. The Federal
statutes that outline requirements for grantees who receive
Federal funds are very clear that this local decisionmaking
must be respected.
By the same token, the laws are quite clear, even if in
many places in the law they indicate that certain processes are
important to follow. A specific one has to do with the public
involvement process. And, while we do not prescribe explicitly
what that local process must be, we are very precise about the
kinds of public involvement that are required for the locals to
make those decisions so that no one is left out. Fundamentally,
it is a local decision, but there are caveats about how those
local decisions are made in the light of day with public notice
about routes, fares, schedules, and those sort of things so
that the local community has an opportunity to have input on
those decisions.
Mr. Tierney. So, we are clear and we agree that there is
nothing in the law that prevents local communities from
choosing private transit providers if they wish to, right?
Ms. Dorn. Correct.
Mr. Tierney. Are there limited circumstances when public
transit agencies should be permitted to provide community-based
charter services directly to local governments and private
nonprofit agencies that would not otherwise be served in a
cost-effective manner by private operators? Now, that is the
question. I am going to give you an example to help you out on
that.
Ms. Dorn. OK. Thank you. I appreciate that.
Mr. Tierney. I do this by way of the representative who
represents Santa Monica Transit. Apparently, the Monterey-
Salinas Transit was recently unable to transport volunteers
from the Defense Language Institute at the Monterey Presidio to
rehabilitate selected homes owned by elderly and disabled. The
community group is called the Monterey-Salinas Rebuilding
Together With Christmas in April. As a result, no service was
provided for the group, since no private charter operator
stepped up to the plate.
In an instance like that, the question really is would that
be an appropriate limited circumstance where public transit
agencies might be permitted to provide those community-based
charter services?
Ms. Dorn. That is a very good question about a complex set
of local circumstances. Let me answer it in general terms and
be very clear that I am not talking about the Santa Monica
issue; it has not been brought to my attention.
If the grantee is providing charter bus service, what it is
that the FTA does is we have responsibility for ensuring that,
in fact, charter service is provided. Mass transit is defined
in the law as not being charter, so our view must be is this in
fact charter in order to determine whether or not there is
inappropriate or appropriate competition with an equitable type
of service.
So the kind of questions we ask, as the grant manager, we
say did the grantee receive approval from FTA for one of the
exemptions provided under law, that no private operator, for
example, is willing and able; did the grantee publish notice of
intent to provide the service; or did a private charter
operator request that the grantee provide charter equipment or
service because it did not have accessible equipment.
We have very specific questions so that we can follow the
intent of the law, which deliberately states that charter is
not mass transit. It is a very complex arena, but we have laid
out in statute and in regulation, in circulars, in guidance,
and in our triennial process exactly what it is that is
required so that the law is followed.
Mr. Tierney. I yield.
Mr. Ose. The difference between charter and mass transit,
if I understand correctly, is whether it is an open door or
closed door?
Ms. Dorn. That is one of a number of conditions, yes, that
is correct.
Mr. Ose. I want to come back to those other conditions.
Mr. Tierney. I yield back. Thank you.
Thank you, Ms. Dorn.
Ms. Dorn. Thank you.
Mr. Ose. All right, I am going to take my 5 minutes.
Those other conditions as to whether or not it is a charter
or mass transit, one is open door versus closed door.
Ms. Dorn. Whether a fee for service has been charged;
whether it is offered to--the open door is, I assume, opened to
a closed----
Mr. Ose. Anybody walk-up?
Ms. Dorn. Exactly. Specified times would be a part of a
charter threshold; and that schedules and the amount that you
pay can be altered by who has requested the service; and,
whether the destination is determined by parties seeking the
service. We have a whole list of what charter is and what mass
transit is, and those are the threshold questions that we ask.
Mr. Ose. How many of those standards have to be met in
order for it to be judged to be a transit service as opposed to
a charter service?
Ms. Dorn. It is my understanding that the issue of the
control of the fares and the schedules very often is the
critical balancing test. These decisions have to be made in the
context of a case-by-case decision, so I can't say that every
single test must be met in its entirety. There is some
allowance for discretion, but these are the general
requirements for meeting the definition of charter.
Mr. Ose. In the Defense Language Institute that my friend
referenced, I presume that was a charter, or determined to be a
charter service?
Ms. Dorn. I couldn't comment on the specific case. I can
say that these are the definitional requirements to meet the
test. So, I wouldn't want to, at the spur of the moment, say it
is or it is not.
Mr. Ose. So, if there is a bus service--and we are, at the
moment, going to leave it undefined--if there is a bus service
from point A to point B that is regularly scheduled to leave
point A at such and such a time and has scheduled stops along
the way intermediate to getting to point B, that would be one
of the standards FTA uses to determine whether this is a
charter or a transit service? Do I understand that to be one of
the thresholds?
Ms. Dorn. If those schedules and stops had been determined
not by the grantee, so to speak, or the provider of the
service, but the acquirer of the service. So control of where
it stops and when, under mass transit, is made by the grantee,
by the service provider, rather than those who are procuring
the service.
Mr. Ose. So, if the acquirer of the service determines
where it stops, it is a charter?
Ms. Dorn. That is one of the conditions, correct.
Mr. Ose. If the provider of the service determines the
stops, one of the tests there would be that it is a transit
service?
Ms. Dorn. That is one of the conditions, yes. That is one
of the ways that it allows us to determine whether, under the
law, it is mass transit or charter.
Mr. Ose. OK. In other words, you have the acquirer of the
service, you have the provider of the service, and then you
have the people who use the service. If the people who use the
service pay a fee to board the bus, is that one of the
standards used to determine whether it is a transit service or
a charter service?
Ms. Dorn. A fee to board the bus?
Mr. Ose. Yes, like $1 to get on the bus.
Ms. Dorn. Well, I understand that, yes, sir. If it is a
part of the contract for service, then that is a charter.
Mr. Ose. So, if the acquirer of the service, who has
determined the schedule and the route and all that, tells the
provider of the service you may charge your users $1, then that
would reinforce FTA's conclusion that it is a charter. But, if
the acquirer makes no such requirement of the provider, either
pro or con to whether or not they charge a fee for their
service, that would be indicative of transit service?
Ms. Dorn. Those conditions may or may not. It is all
dependent on the specifics of the contract, the specifics of
the case as interpreted by the very issues that we need to
consider by law of what is charter and what is mass transit.
So, Mr. Chairman, I just hesitate to posit by taking one
particular condition and then to say in this instance that is
charter. And, certainly we could very carefully, for the
record, provide an answer, but it very likely would be the same
answer; it may or may not, depending on other aspects that we
have to consider.
Mr. Ose. What are the other aspects?
Ms. Dorn. What we talked about, the fee for service,
whether it is under the contract, it is to a specific group of
people, whether the people who ride can alter the time or the
people who procure. There are a number of issues defined in our
regulation about what is charter service.
Mr. Ose. It would seem to me that, on each of these
standards, as it relates to a predetermined route, you either
have a predetermined route or you don't. It would seem to me
that if someone who boards the bus is assessed a fee for that
on a use basis, you either have that or you don't. You either
have the ability to change the arrival or departure times or
you don't. You either have the ability to change the route or
you don't. And, what I am trying to get is whether or not, in
the aggregate having evaluated each of those parameters, is
there some sort of scoring system that gets you to a
determination whether something is a charter or a transit?
Ms. Dorn. In some instances, Mr. Chairman, it is relatively
subjective and, as I said, very often the tipping point, so to
speak, has to do with who controls the fares and the schedules.
Every provision of different types of service, charter or
whatever kind of service, has different kinds of
characteristics depending on where they are going, what the
contract is.
So, we look to the specific contract. For example, one
contract in a charter service may permit the driver to stop at
a senior citizen center that wasn't previously scheduled
because his charter contract bus is not yet full, so he or she
can divert and go to a senior citizen center that wasn't
contemplated on that day's charter trip. So, I just use that by
way of an example that each of these cases requires very
careful examination.
Mr. Ose. You are saying that some of these parameters may
actually indicate one as opposed to other parameters may
indicate exactly the opposite. In effect, one of the tests that
you have highlighted, you have the ability to waiver from a
fixed route, but that would indicate that it is either a
transit or a charter, without a definitive determination. But,
then you may have another thing where you pay a charge to get
in, which indicates it is exactly the opposite. That is what
you are suggesting, that you have to take them in the aggregate
rather than individually, if I understand your testimony?
Ms. Dorn. I would just say that each case is evaluated on
its own merits in comparison to the standards that are defined.
And, the nature and type of transportation in our country is so
rich and so diverse that it must, and should, be made on a
case-by-case basis with a very as strict as possible
definition. So, I would not want to say that we have to take
the aggregate versus weighing this or that.
Mr. Ose. I thank the gentlelady.
The gentleman from Ohio.
Mr. Tiberi. Thank you, Mr. Chairman.
Ms. Dorn, do you believe that a publicly funded entity
should be in the business of providing service competition in
the same market with an already private serving entity?
Ms. Dorn. A couple of comments with respect to that good
question, Congressman. First of all, this administration is
strongly supportive of encouraging, enabling under the law
private sector participation in transportation. That serves
every community better when those options are available and
they are exercised when locally preferred, and it allows
transportation to be more robust and to continue our economy's
growth. First point.
Second point, FTA is bound by the strict reading of the law
in terms of under what conditions there can be appropriate
competition or not. The FTA law specifically allows federally
funded mass transit transportation to compete with the private
sector under certain conditions, and there are a number of
conditions that are outlined in the law that only if that
service, for example, is essential to a program of service, not
the grantee's, a program of service for the community; if it
provides for participation of private companies to the maximum
extent feasible; if just compensation is paid; and, it is my
understanding, labor protections are in place. So, the law very
specifically tells us under what conditions it is appropriate
for public to compete with private in the arena of mass
transportation, and we have endeavored at the FTA to fulfill
and respect very carefully that careful crafting in statute.
Mr. Tiberi. Let me get a little more specific. In our May
18th hearing earlier this year, ENOA Corp. in Hawaii presented
one such case.
Ms. Dorn. I am sorry, I am having trouble hearing.
Mr. Tiberi. ENOA Corp., at our May 18, 2004 hearing,
presented one such case. In today's hearing Oleta Coach Lines
in Williamsburg will be presenting another such case of the
public sector competing with the private sector. Since January
20, 2001, can you tell me how many times the FTA has enforced
the provision in its own rules to ensure that local government
mass transits are not competing unfairly with existing private
sector companies?
Ms. Dorn. First, may I comment on the Williamsburg case? It
is my understanding that is on appeal to my office, so it would
be inappropriate to comment.
Mr. Tiberi. OK.
Ms. Dorn. I just wanted to make the record clear on that.
With respect to how we enforce what we vigorously believe
and what the law requires, we are a grant-making agency that
has very strict contractual requirements with every grantee.
With respect to private sector participation, we have planning
requirements generally for both the grantees and the
metropolitan planning organizations, and we insist that they
take a strong look at what has been required in the law about
private sector participation.
As you know, Congress has very seriously limited FTA's
authority to enforce or to withhold certification in that
arena; however, there are other arenas, the charter bus issue,
the school bus violation, etc., where we take a very close look
through triennial reviews, which we work with our grantee
regularly, we do quarterly reviews, and we are very serious
about their knowing the private sector participation
requirements and fulfilling them.
For example, in the triennial review we have determined
there were about 12 formal complaints with respect to charter
or the triennial review. We have had, over the past several
years, 10 findings in our triennial review that indicate there
is a problem with how the transit agency completes that private
sector requirement. We have very vigorously enforced to make
sure that they remedy those problems, and I am pleased to say
that in the 10 instances where we found a violation of private
sector involvement, those have all been remedied by the
grantee.
Mr. Tiberi. You can just give me a number answer, if you
could, on this. Since January 2001, how many protests have you
received from existing private sector mass transit providers
about unfair competition? Just if you could give me a number.
Ms. Dorn. I know of none at the formal headquarters level.
However, I make it very clear that in our grant-making
responsibility, our regional offices are working daily with our
grantees, and many times informally they will say to the
grantee we don't see your public involvement process, you don't
have a public notice, we are going to withhold funds, or let us
wait until you put this mechanism in place. So many times that
is informally resolved. Our strong interest, as the
Administrator of mass transit programs, is to ensure that the
community receives the services that are in so many cases
desperately needed.
In the context of doing that, we work on a day-to-day basis
to make sure that our grantees are compliant with the law and
that we don't stop the delivery of service. What we want to do
is to get compliance. Our records at the headquarters level
show that these kinds of complaints are rare.
Mr. Tiberi. Mr. Chairman, can you indulge me just one final
question to followup?
Mr. Ose. I would indulge you however you like.
Mr. Tiberi. Just a yes or no answer. Take your FTA hat off.
Do you believe that a public sector entity should compete with
a private sector entity already in existing market? Take your
FTA hat off. Yes or no?
Ms. Dorn. Sir, I won't take off my FTA hat, but I would say
to you that personally and professionally I believe there is
wisdom in the law as they have prescribed the mass transit
issue. I think there are many factors to be considered, and I
believe that this administration has proposed significant
enhancements for private sector involvement, which I thoroughly
support, and that would make the law even better.
Mr. Tiberi. Thank you.
Mr. Ose. I want to followup on a question you asked having
to do with Williamsburg.
Ms. Dorn, on September 14th, a local James City Council
Community Services official stated that ``Williamsburg Area
Transport has been pleased to operate this successful pilot
project, but does not intend to operate the route in the
future.'' Would that charge your response to Mr. Tiberi's
inquiry regarding that matter and your freedom to comment on
it?
Ms. Dorn. I am sorry, I am having trouble hearing.
Mr. Ose. Williamsburg Area Transport does not intend to
operate the route in the future, as of September 14, 2004.
Ms. Dorn. I would still hesitate to comment on the facts of
the matter, because I am not aware of all of the facts of the
matter. So, I would suggest that I would be very happy to take
a look at the matter if it is not a formal complaint that needs
to go through a particular process, but I think it is risky to
posit something when I don't have the entire facts.
Mr. Ose. I am pleased to recognize the chairman of the full
committee who joins us today, Mr. Davis of Virginia.
Mr. Davis. Thank you, Mr. Ose. I appreciate your holding
this hearing. I just have one question.
On the active and proposed public-private partnerships in
Virginia, we have a completed project, the Pocahontas Parkway,
and five active public-private partnerships now: Route 28,
Route 288, the Colefield Expressway, Jamestown 2007, and Route
58. In addition, we have six rail or road projects that are in
the proposal stage, including Dulles rail, which is very
critical; the Hot Lanes on the Beltway; Hot Lanes on I-95 and
I-81, widening the Powhite Parkway western extension in the
third; Hampton Roads Crossing.
What is your view on all such proposed projects; have you
been involved; and can you comment on the Dulles rail project
in particular?
Ms. Dorn. Sure. Let me begin, Congressman Davis, with the
first point, Washington-Dulles. The project which has now been
approved to be into preliminary engineering, we are pleased
that this is the first to use the procurement method under
Virginia's Private-Public Partnership Act for Mass Transit. We
believe that this has very important prospects for delivering
on time, on budget this important transportation segment in
this corridor. It is one of FTA's New Starts proposals, and we
are certainly supportive of the increased private sector
investment.
Our primary involvement, however, has been related more to
the criteria for financial investment and whether it meets the
test. However, we look forward to continuing to work with the
grantee in this unique and hopefully growing public-private
partnership approach.
With respect to the other five highway public-private
partnerships, I would want to defer to my colleague, Federal
Highway Administrator. We can either do that for the record or
we have an individual here who could speak more specifically.
Mr. Davis. Let us hear from him.
Ms. Dorn. OK, great. D.J. Gribbin is the Chief Counsel for
the Federal Highway Administration.
Mr. Davis. Was he sworn?
Mr. Ose. Mr. Gribbin, please rise and raise your right
hands.
[Witnesses sworn.]
Mr. Ose. Let the record show the witness answered in the
affirmative.
The gentleman from Virginia.
Mr. Gribbin. Thank you, Mr. Chairman. In response to your
question, the Federal Highway Administration has been working
very closely with VDOT and the Warner administration on all of
those projects. In fact, on the I-81 project in Virginia in
particular, that is what we call a SEP-14, a Special
Experimental Project 14, which we use on a case-by-case basis
to help advance public-private partnerships. In this case, we
have a regulation that does not allow a State to issue an RFP
prior to a recorded decision on a project. We use SEP-14 to
waive that requirement because of the unusual nature of the I-
81 project. That was the first time in the Nation that we had
done so.
Mr. Ose. I thank the gentleman.
Ms. Dorn, currently FTA has 18 codified rules, including
one for planning assistance and standards, one for project
management oversight services, one for credit assistance for
surface transportation projects, but has none on private sector
participation. And the source that I am referring to is right
here--the Code of Federal Regulations. In 1994 Congress passed
amendments to the 64 Mass Transit law requiring private sector
participation to the maximum extent possible, and that is
Sections 5306(a) and 5307(c) of Public Law 103-272.
In a June 28th of this year reply to one of my post-hearing
questions, the Department of Transportation stated, ``Section
5307(c) compels FTA to accept a grantee's annual certification
of intent to comply. . . . FTA carries out the Section 5307(c)
mandate through the agency's triennial review process.''
DOT also noted that in 1994 the prior administration
rescinded the Reagan administration's October 1984 nonbinding
guidance on private sector participation.
In your written statement for today's hearing, you stated
``in our judgment additional rulemaking is not necessary for
FTA to enforce current law,'' and that is on page 2 of your
statement.
Now, after discovering grantee confusion and noncompliance,
in August 2003, I requested that you issue implementing rules
for Sections 5306(a), dealing with private enterprise
participation, and 5307(c), dealing with public participation
requirements.
One logical option, it seems to me, is to amend FTA's major
capital investment rule, Part 611, since it already implements
part of 49 U.S. Code Section 5309, Capital Investment Grants
and Loans.
Do you intend to amend an existing FTA rule or issue
another freestanding FTA rule in order to clear up grantee
confusion on this matter?
Ms. Dorn. Mr. Chairman, FTA addresses private sector
participation requirements in a variety of regulations and
circulars, including the very important joint FTA-Federal
Highway Administration planning regulations implementing the
two sections which you mentioned, 5306 and 5307. With
considerable changes affecting the private sector involvement
now before Congress, we are very hopeful that those will pass,
and I do not believe that it would be fruitful to amend the
current regulations at this time.
However, as I indicated in my oral statement, I agree that
because there are so many places at which private sector
involvement requirements are in the law, the regulations, the
circulars, that I do believe a clarification is needed even in
the interim, while we await passage of the legislation; and I
have directed my staff to develop a plain English guide, if you
will, for comment, and we expect that to be ready for
circulation within 90 days.
It is my view that currently we do not need to modify the
rules to get clarification. We may need to better explain the
rules that exist and make sure that they are in a more user-
friendly fashion.
Mr. Ose. I am trying to find the assurance under which this
subcommittee basically can say this issue has been resolved so
I can go on to the next, because I have no shortage of similar
issues in other agencies that are kind of like in a queue
waiting to be looked at. I am not sure that I share your
confidence that the highway authorization bill is going to be
passed and that will take care of clarifications such as you
suggest.
This isn't exactly a new issue. I have to express some
dissatisfaction to you that, notwithstanding your comment that
you are going to undertake guidance, guidance isn't binding. It
just simply isn't binding; it has no legal force. I am just not
convinced that, frankly, you are taking this very seriously.
Ms. Dorn. In our agency, contractual commitments are
definitely binding, and I can assure you that we have very
vigorously enforced, through our triennial review process and
the master agreement that all grantees must sign and certify,
if and/or when we find a violation of these private sector
requirements, we get on it.
And, in fact, as I mentioned, of the 10 that we discovered
over the past number of years, each one of them has been
resolved. We don't give the agency the option to resolve it in
the long-term; we say X number of days we expect the public
involvement process, for example, to be remedied by adequate
private notice, etc.
Mr. Ose. Well, I would like to explore that for a little
bit, because I have more than a passing knowledge of one that I
brought to your attention. Pursuant to a triennial review you
did of SACRT back, I believe, in the year 2000, you entered
into a Memorandum of Understanding regarding a Standard
Operating Procedure for the days going forward.
Yet when I brought it to your attention that Sacramental
Regional Transit has not complied with the requirements of that
MOU in terms of how they conduct their affairs relative to one
public-private competition, I have yet to see the first
meaningful step whereby FTA would hold those folks accountable
for not complying with an agreement that they signed long prior
to the issue of this public-private competition arising.
This has to do with the issuance of a contract for service,
but even more fundamentally how that contract was awarded in
the first place, which your people examined under that
triennial audit, identified the flaws, brought them to the
attention of the local entity, had them sign an agreement
saying that they would fix their systems; they haven't fixed
their systems, I have brought it to your attention, and nothing
has happened.
Ms. Dorn. Mr. Chairman, we have documentation that
requirement has been met, in terms of public involvement, and
we asked, in the context of the case that you mentioned, for
that documentation to be submitted. We examined it and we found
it to be sufficient. To our knowledge, the grantee is in
compliance. If you have additional evidence to that effect, FTA
would eagerly take a look at that matter to ensure that it is
remedied.
Mr. Ose. My point is that there was absolutely no
consequence for the overt act commissioned by Sacramento RT for
changing their advertising pattern from the historical norm in
a single instance, the net result of which was to take a
private service provider out of a position and replace them
with a public service provider. You can call it potato soup if
you want, but a rose by any other name has thorns.
This was a screw-up on the part of FTA. You can dance
around the issue, you can talk about minimal compliance, but
the net effect of the lack of oversight on behalf of FTA in
terms of the Memorandum of Understanding that resulted from
your triennial review is that the advertising that should have
taken place in a particular manner did not and a private
provider lost a service.
Now, you and I can sit here and debate it all you want, but
the net effect is that the system got hijacked; I brought it to
your attention. Near as I can tell, you haven't even sent a
single letter to the municipal entity calling to their
attention the fact that they changed their system, and I have
to express to you some not so small dissatisfaction with that.
Ms. Dorn. I understand and respect that. I respectfully
disagree. We have done everything we have been able to do to
both resolve the case fairly and appropriately under the terms
of the law, and it is our understanding, clearly been
documented, that this agency is in compliance with what we
required of them in the triennial review.
Mr. Ose. Under the basis that it was a charter service, as
opposed to a transit service?
Ms. Dorn. That is our lawyer's view of the law.
Mr. Ose. The parameters of which are very subjective.
Ms. Dorn. Pardon me?
Mr. Ose. The parameters of which, according to your earlier
testimony, are highly subjective.
Ms. Dorn. I don't believe I said highly subjective. There
are elements of subjectivity, and that is why there is case law
that would advise us and very specific lengthy list of factors,
no single factor being the exclusive factor.
Mr. Ose. You can see why I was so interested in the
parameters. I have no small frustration in getting FTA to
define what those factors are in a determinant status so that
people can actually rely on them in the future. That is why I
asked for a rulemaking, as opposed to guidance, on these
issues.
Ms. Dorn. We certainly have not kept as secret the factors
which define charter; anything but. I personally sent a letter
to over 600 grantees in the last year to very strictly define
what is charter, what is not, to what standards they must be
held accountable in the law and our regulations. So, we are
doing everything possible to make this user-friendly and so
that everyone knows what is and is not a charter.
Mr. Ose. Gentleman from Virginia.
Now, the governmentwide grants management common rule
provides various remedies for noncompliance by a grantee, and
some of those remedies include temporarily withholding cash
payments pending correction of the deficiency, disallowing all
or part of the cost of the action not in compliance, wholly or
partly suspending or terminating the current award for the
grantee's program, withholding further awards for the program,
taking other remedies that may be legally available. These are
just some of the remedies for grantee noncompliance.
As it relates to the triennial review that indicated that
the Standard Operating Procedure at SACRT did not meet FTA's
requirements, were any of these remedies implemented?
Ms. Dorn. I am not exactly sure where to start on this
question because we have a fundamental disagreement about how
the common grant rule applies to FTA programs.
Mr. Ose. Well, let us even go back further.
Ms. Dorn. OK.
Mr. Ose. Did you or did you not find SACRT in compliance
with your operating procedures pursuant to your triennial
review in the year 2000?
Ms. Dorn. With respect to the bus plans for bus
procurement, correct, we did not find them in compliance. They
later came into compliance through the documentation that was
submitted to us.
Mr. Ose. I had a conversation with the Executive Director
of Sacramento RT on July 14, 2004, in which she told me quite
directly, in response to a direct question, no, we didn't
bother to implement those things for 3 years. Now, at what
point did you make the determination that SACRT was in
compliance with the triennial review?
Ms. Dorn. I am not sure of the dates, sir, but I do know
that we have documentation, to the best of my knowledge, that
those requirements were put in place in a timely fashion.
Mr. Ose. Actually, they told you they were put in place.
Ms. Dorn. We saw notifications of public hearings and other
such documentation. I cannot recall what it was, but I asked if
we had the documentation in hand; they said yes; I looked at
it. More importantly, my Chief Counsel thoroughly examined it,
and we were satisfied.
Again, if there is additional evidence that relates to this
case, then we would be more than happy to review it. We do not
have that.
Mr. Ose. For the record, would you please check on the date
so that I can compare the date at which you made that
determination to the date indicated by the Director SACRT, the
date indicated to me in July of this year as to when they
actually implemented those provisions? I will give you a
question, if you would like, in writing to which you can
respond.
Ms. Dorn. Whatever you prefer, sir. That would be fine.
Mr. Ose. Given the history of this particular grantee and
my concern about FTA's oversight of its compliance, there
remains a question dealing with this particular grantee
amounting to about $1 million in previous years' unobligated
money that was otherwise directed to SACRT. I am aware that as
of September 1st of this year there were previously unobligated
funds totaling $990,000 and change which were to expire on
September 30th, today. Has FTA, since September 1st, approved
the release of these funds to SACRT?
Ms. Dorn. I would be happy to provide that for the record,
sir. I am not aware. We have 2,000 grantees, and certainly in
the last month there is always a rush by our grantees to
obligate funds because they have completed adequately the
process. I would be happy to check on that.
Mr. Ose. These are fiscal year 2002 funds.
Ms. Dorn. OK.
Mr. Ose. Now, I notice the gentleman who came up and
testified a moment ago has a Blackberry that is readily
available. Perhaps during the course of our conversation he can
contact your office and find out the status of these funds. Do
you think that would be possible?
Ms. Dorn. We will make every effort.
Mr. Ose. OK.
On our second panel today we have invited two witnesses,
Iris Weinshall Schumer, who is the commissioner of the New York
City Department of Transportation and the chairman of the
Transit Alliance representing seven affected private sector
transit operators to discuss the proposed takeover by a
federally funded local transit agency, that being the
Metropolitan Transit Authority [MTA], of private sector bus
services in Queens, Brooklyn, the Bronx, and Manhattan that
currently operate under contracts with the city.
On June 11th of this year, the Council of the city of New
York held a hearing on this particular idea, and its briefing
paper for the hearing stated that the proposed takeover
potentially makes the city responsible for paying hundreds of
millions of dollars in transfer costs arising from necessary
purchases of infrastructure, such as additional depots,
garages, buses, and fueling stations.
The Transit Alliance's written testimony for today's
hearing states that ``the most recent budget submitted to the
City Council calls for payment to MTA of $161 million, which is
approximately $11 million more than present costs for delivery
of the same service.'' It also states that ``once the takeover
is consummated the MTA plans to cut service.'' And, attached is
a September 23rd of this year letter from an AFL-CIO union
stating that ``the MTA has not shown any evidence that it can
adequately fulfill this major undertaking. . . . this. . . .
would, without a doubt, be a `lose-lose' situation to all.''
Do you have any estimate of the difference in total public
costs between the current franchisee arrangements and the
proposed takeover that I have just cited?
Ms. Dorn. No, sir, I do not.
Mr. Ose. Does FTA play a role in providing funds to the
city of New York necessary to facilitate this takeover?
Ms. Dorn. No. It is my understanding not. This issue, as I
understand it, as you have described it, it is a local matter
at this point. However, I am asking my Regional Administrator
to ensure that the requirements of the law are known to the
grantee so that private sector involvement requirements, public
involvement requirements are met on this very important matter.
I certainly agree that this kind of local decision we must do
everything possible to make sure that we make aware to the
grantee their requirements for full public involvement so that
a decision can be made. We have received no complaints on that
matter to date.
Mr. Ose. My investigation of the situation leads me to
believe that, as it relates to Queens, Brooklyn, the Bronx, and
Manhattan, you have mass transit service being provided by
private operators, and that at least facially it appears to me
as if the city of New York is moving to acquire those services
so that such services can be provided by a public entity. If I
understand that correctly, they cannot use Federal money to
effect that change?
Ms. Dorn. It is my understanding that decision by MTA has
not been made; they are in the process of making local
decisions on that. What our role is is to make sure, as MTA and
the city pursue possible changes, that they comply strictly
with the law respecting public involvement and private sector
involvement.
Mr. Ose. Under the understanding that you have of this
situation, is the city of New York able to rely on the FTA for
grants, the purpose of which would be to effectuate the
purchase of these private services?
Ms. Dorn. I have no specific knowledge about that piece. I
would not want to hazard a guess.
Mr. Ose. If the circumstances are as I have described, in
that the services currently being provided in Queens, Brooklyn,
the Bronx, and Manhattan, are in fact privately provided, can
the city of New York be confident that FTA will approve their
grant for funds, the purpose of which will be to acquire these
private services?
Ms. Dorn. Our job is to make sure that the requirements for
private participation are met. So, I don't want to prejudge
what they might decide, in what context, etc. We have a very
strict law and interpretation about what it is that we can and
cannot do in terms of a local decision, and I would not want to
hazard a guess as to what this grantee has in mind, what the
city has in mind, but we do know that there are very
specifically laid out protections in certain instances for the
private sector, as I described for the Congressman earlier.
Mr. Ose. In a hypothetical situation involving four
privately owned mass transit services in suburbs of a
hypothetical large city, if the hypothetical large city sought
to acquire those private services, would the hypothetical large
city be able to rely with any degree of certainty on the FTA
being willing to provide grants, the purpose of which would be
to acquire such private mass transit services in such
hypothetical suburbs of hypothetical large city?
Ms. Dorn. Mr. Chairman, they could certainly rely on the
fact that FTA would vigorously enforce the law with respect to
Section 5323(a), which says FTA law specifically allows
federally funded mass transportation to compete with the
private sector under certain conditions. So, the test would be
whether or not those conditions have been met. That is the law
that we are required to administer, and you can believe and
accept, I hope, that we will vigorously enforce that law, as is
our job.
Mr. Ose. Could you highlight for me your understanding of
the conditions under which a public entity could compete with a
private provider under such circumstances?
Ms. Dorn. If the service is essential to a program of
services, if the service provides for participation of private
operators to the maximum extent feasible, if just compensation
is paid, and if labor protections are in place. Those are the
generic conditions which are specifically outlined in our rule,
in our law, that define the conditions under which the public
sector can compete with the private sector in mass transit.
Mr. Ose. So, if the circumstances are such as to allow the
public sector to compete, just compensation would have to be
paid? Just compensation for what?
Ms. Dorn. I don't want to move inappropriately beyond my
depth; I am not a lawyer. This is a very complex matter of law.
I would like to ask my Chief Counsel.
Mr. Ose. Would Mr. Sears like to be sworn in?
Ms. Dorn. That would be fine. I would like him to be. Thank
you.
[Witness sworn.]
Mr. Ose. Let the record show that Mr. Sears answered in the
affirmative. Mr. Sears is the Chief Counsel for the FTA.
Sir.
Mr. Sears. Thank you, Mr. Chairman. The provision of just
compensation under 49 U.S.C. 5323(a) is a provision that has
not been opined on much by FTA in recent decades, as there has
been very little in the way of a provider of public
transportation acquiring a private provider of transportation.
But, the general rule of law in this area of statutory
construction is that there is a reasonableness standard applied
to what just compensation is, and it is determined on a case-
by-case basis.
Mr. Ose. If the public entity provides a service, and the
ridership on the private provider goes down, is there an
element of condemnation there?
Mr. Sears. Condemnation as a matter of law, sir?
Mr. Ose. Yes.
Mr. Sears. I don't believe so under 5323.
Mr. Ose. OK.
Mr. Sears. But, I would have to look into that, sir.
Mr. Ose. Does the issue of just compensation relate to the
facilities or to the value of the franchise that might be
affected?
Mr. Sears. Well, if I could reiterate that it has been, I
believe, at least 20 years since this provision of law was
exercised before at the time the Urban Mass Transportation
Administration. I believe that just compensation speaks toward
the loss to the private provider of public transportation and
that the calculus is grounded in the loss to the private
provider.
Mr. Ose. So, it would go beyond just the actual real estate
or rail line, to the value of the franchise itself?
Mr. Sears. Again, the jurisprudence surrounding this is
somewhat dated, but my recollection is that is correct, yes.
Mr. Ose. I wonder how it is we could possibly share such
information with the potential public provider in New York
City. Any idea how that might happen?
Our second panel today, we have two witnesses. The first is
the District of Columbia Director of Transportation and the
other is the only person who for 30 years has operated the
competitively awarded private sector franchise known as the
Tourmobile, who will discuss the proposed two-phase Downtown
Circulator system in Washington, DC.
Now, a May 8, 2000 National Park Service memorandum states:
``The system proposed for implementation in the study may
require financial subsidy to operate and will provide no
monetary return to the National Park Service. The present
concessioner-operated interpretive shuttle does not require
subsidy and pays fees in which four National Capital Region
parks and the National Park Service--split on an 80/20
franchise fee basis--approximatley $600,000 to $700,000
annually.''
In December 2000, the Department of Transportation Office
of the Secretary co-signed a Memorandum of Agreement for the
proposed circular system, stipulating that DOT agrees to
``Guide the MOA group through the reauthorization process of
the transportation funding bill.''
What specifically has Department of Transportation done to
advance this project since January 21, 2001?
Ms. Dorn. FTA has not participated in any monetary way with
respect to this, so no Federal requirements are applicable,
including the private sector. I will need to get back to you
with respect to the Memorandum of Agreement; I am not familiar
with the specifics of that, although I do know that the FTA's
requirements would not be triggered because there is no funding
involved from our agency. So, I would be happy to provide for
the record a more explicit discussion about the Memorandum of
Agreement which you cite.
Mr. Ose. Mr. Sears, it is my understanding we have faxed
you a copy of that Memorandum of Agreement. Is that true?
Mr. Sears. I apologize, sir, I can't attest as to whether I
received that fax or not.
Mr. Ose. We will followup on this in writing. What we are
looking for is dates and documents for the hearing record.
Now, the District of Columbia Downtown Business Improvement
District Web site on its proposed circulatory system states
that current estimates are just under $12 million in capital
costs and $6 million annually in operating costs. Do you know
if these costs include any financial subsidy? Do they recognize
the full buyout cost for the franchisee known as Landmark
Services Tourmobile? If so, how much is estimated for the
subsidy and how much for the buyout? And, if not, do you have
separate estimates for the subsidy and the buyout, and what are
they?
Ms. Dorn. FTA has no involvement from the funding
perspective, nor any other perspective that I am aware of, so I
can't comment on any more than that.
Mr. Ose. FTA has not been approached, either preliminarily
or otherwise, by the District of Columbia City Council and the
like regarding potential grants that might be used to
facilitate this takeover?
Ms. Dorn. To my knowledge, not; however, our regional
offices on a regular basis attempt to respond to inquiries from
organizations, private and public, all the time. So, I wouldn't
want to say that no one has approached FTA. I do know that no
funding has been committed or contemplated from the
headquarters perspective.
Mr. Ose. OK, we will be sending you a letter for further
followup on this subject.
Ms. Dorn. OK.
Mr. Ose. This, to me, is one classic example. Having almost
been run down by the Tourmobile on numerous occasions, I want
to make sure that it stays in existence so it can run down my
successor.
Mr. Tiberi.
Mr. Tiberi. No further questions.
Mr. Ose. Mr. Davis.
Mr. Davis. Let me ask you, the impact of street closings on
mobility downtown, are you familiar with that?
Ms. Dorn. Sir, I could not speak to that; my colleague from
the Federal Highway Administration would potentially be able to
do that.
Mr. Davis. Be better off.
Ms. Dorn. Would certainly be better, yes.
Mr. Ose. Bring him up here.
Mr. Gribbin. I have already been sworn.
Mr. Ose. You have been sworn.
Mr. Davis. Let us talk about these street closings going on
downtown. Obviously it has had a huge effect on mobility. It is
even having an effect on mobility around the Capitol, trying to
get in in the mornings. What is the Federal Government doing to
address access and mobility downtown?
Mr. Gribbin. I apologize, Mr. Chairman, I am actually not
prepared to answer that question this morning. We can get an
answer back to you.
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Mr. Davis. All right. I will wait until the next panel.
Mr. Ose. I am sorry, Mr. Chairman, I missed that. I was
multi-tasking.
I want to thank Ms. Dorn, Mr. Sears, the gentleman from
Federal Highway for joining us today. We have a number of
questions; we will be sending you followup in writing. We would
appreciate a timely response. We want to encourage you to
expedite your rulemaking in any way, shape or form we can. And,
I am just not done with Sacramento RT.
Ms. Dorn. We got that impression, sir.
Mr. Ose. Thank you.
Ms. Dorn. Thank you.
Mr. Ose. We will take a 5-minute recess.
[Recess.]
Mr. Ose. All right, we are back. This is the second panel
for the Subcommittee on Energy Policy, Natural Resource and
Regulatory Affairs hearing on the subject of ``How Can We
Maximize Private Sector Participation in Transportation?''
Our second panel is composed of five individuals. They are
Dan Tangherlini, who is the director of the District of
Columbia Department of Transportation here in Washington; Mr.
Tom Mack, the chairman of Tourmobile Sightseeing here in
Washington, DC; Mr. Jerome Cooper, chairman of the Transit
Alliance and president of Jamaica Buses, Inc., in Jamaica, NY;
Mr. David Smith, director of marketing and sales for Oleta
Coach Lines, Inc. from Williamsburg, VA; and Mr. Steven Diaz,
esq., former Chief Counsel for the Federal Transit
Administration at the Department of Transportation.
Gentlemen, as you saw in our first panel, we swear in all
our witnesses. That is the standard of course; it is not
judgmental. If you would all rise and raise your right hands.
[Witnesses sworn.]
Mr. Ose. Let the record show that all five witnesses
answered in the affirmative.
Now, as with our first panel, we have received your written
testimony. In front of you I believe this monitor is working;
that monitor is not. They are all working now. I stand
corrected. They are both working. There are three little
rectangles on that larger black box; there is green, yellow,
and red. Green means you are in your 5 minute period; when it
switches to yellow, it means you have a minute left; and, when
it switches to red we put you on a long bus ride to pick your
destination.
Your testimony has all been received; we have looked at it.
We are very appreciative of your preparing it and submitting
it. We are going to recognize each of you in turn to summarize
your testimony in 5 minutes. Every got it?
Mr. Tangherlini, thank you for joining us today. You are
recognized for 5 minutes.
STATEMENTS OF DAN TANGHERLINI, DIRECTOR, D.C. DEPARTMENT OF
TRANSPORTATION, WASHINGTON, DC; TOM MACK, CHAIRMAN, TOURMOBILE
SIGHTSEEING, WASHINGTON, DC; JEROME COOPER, CHAIRMAN, TRANSIT
ALLIANCE AND PRESIDENT, JAMAICA BUSES, INC., JAMAICA, NY; DAVID
N. SMITH, DIRECTOR OF MARKETING AND SALES, OLETA COACH LINES,
INC., WILLIAMSBURG, VA; AND STEVEN DIAZ, ESQ., FORMER CHIEF
COUNSEL, FEDERAL TRANSIT ADMINISTRATION, DEPARTMENT OF
TRANSPORTATION, LAW OFFICE OF STEVEN A. DIAZ
Mr. Tangherlini. Thank you for having me, Mr. Chairman.
Chairman Ose, members of the committee and staff, my name is
Dan Tangherlini, and I am the director of the District of
Columbia Department of Transportation. Thank you for inviting
me here today to testify on the topic of private sector
participation in transportation, especially regarding the
proposed Downtown Circulator. I particularly look forward to
the opportunity to clear up some misconceptions about the
Circulator proposal.
First, I would like to give you some context about the DDOT
and the amount of work that we do with the Federal Government
and with the private sector. In fiscal year 2003, the last year
in which we have closed the books, DDOT spent $42 million of
local funds and $200 million in Federal funds on road, bridge,
highway construction and maintenance. Of that sum, more than 90
percent was contracted out to the private sector. Since Mayor
Anthony A. Williams took office in 1999, the amount of
contracting to the private sector has increased from $110
million to $219 million, or more than 100 percent increase.
The Williams administration and my Department are committed
to ensuring that the District's citizens get the most value out
of each transportation dollar spent on their behalf, and we are
very proud of our record.
The idea for a Downtown Circulator was developed by the
National Capital Planning Commission as part of its legacy
plan, a long-range vision plan for the Nation's capital
completed in 1997. This Federal agency is tasked with ensuring
the Nation's capital's workers, residents, and visitors can get
around the city as quickly and easily as possible. They saw on
the horizon a need for much expanded public transportation
options in order to link popular destinations for an ever-
growing population of downtown core.
Everything foreseen by the NCPC has been confirmed by local
studies over the last decade. Downtown D.C. has added
approximately 9.5 million square feet of office space since
1998. There are 3,000 new residents living in or near downtown,
and another 3,000 new residents will be moving in next year.
During this same period, we have added an enormous amount of
cultural and entertainment space, and are attracting millions
of more visitors than we were just 8 years ago.
In short, the District has added a city the size of
downtown Denver in the last decade, while we have eliminated 70
percent of all short-term surface parking, reduced available
roadways through security closures, and we have not added a
single bus route to help people move about downtown. The city's
transit service has traditionally focused on bringing people
from surrounding communities and neighborhoods into and out of
downtown.
Last month, the annual Texas Transportation Institute study
of congestion placed Greater Washington with the third worst
congestion in the country, after Los Angeles and San Francisco,
and we only missed that by 1.4 minutes of delay per person, so
we are catching up. Many of the people clogging suburban
roadways are coming into the District and may be encouraged to
take public transportation if we do a better job of providing
surface links.
Finally, the National Park Service provided us with
invaluable data earlier this year on the unmet demand for
transportation by visitors to downtown D.C. The Park Service
survey found that fully 71 percent of visitors, representing
millions of people per year, would like to use an inexpensive,
non-interpretive bus service if one were available.
In late 1998, the Downtown D.C. Business Improvement
District, a group of downtown property owners, developers, and
business leaders, took the NCPC idea and began to develop it.
The idea for a Downtown Circulator was widely embraced by
downtown business interests, a number of Federal agencies,
including GSA and the NCPC, the Mayor and the D.C. Council.
The plans for the Circulator have evolved over the years.
The planning group attempted to be as creative as possible to
solve as many problems of congestion, access, and mobility as
possible. As ideas were tested and discussed, we were able to
develop a realistic plan of action that includes two phases of
service: one that could be developed independently by DDOT with
its existing partners and a second phase that could be
developed in conjunction with the private sector and the
National Park Service. In fact, I will add one reason we
divided the project into two phases was to avoid in any way
encroaching on the Park Service's existing single interpretive
service concessionaire.
The Downtown Circulator is designed to be low-cost, very
frequent, and faster than other public transportation due to
less frequent stops. It is a form of bus rapid transit, if you
will, and will provide no interpretive service.
Phase I of the Circulator, which is scheduled to begin in
the spring of 2005, has a route to link Union Station with
Georgetown via the new residential neighborhood growing along
the Convention Center-Mass Avenue corridor, as well as tying
the Convention Center to our emerging Anacostia development
area. We also hope to extend it perhaps to the new baseball
stadium.
It was always our desire to bid out Phase I, and until just
last week this was not an available option. We have since
learned that there may be a possibility to bid this phase to
the private sector. If the National Park Service were to allow
some opening of the existing concession, it would be our view
that a variety of services should be offered through bidding
with the private sector.
What may really be at issue is Phase II, a service that
could be available to 92 percent of mall visitors who do not
use current interpretive service, and the more than 70 percent
of mall visitors who would like low-cost, non-interpretive
transit service. Nothing can happen in Phase II without Federal
involvement through the Park Service. If NPS chooses to change
and/or compete the existing more than 30 year old arrangement,
we believe a private sector-operated non-interpretive service
should be offered.
In conclusion, the District Government and its public-
private partners have worked hard with the private sector to
include them in every project we have done over the last
several years. Despite the fact that there is absolutely no FTA
funding being used to support Phase I of the Circulator, we are
committed to work with the private sector operators to the
extent we are able.
I very much appreciate the opportunity to appear before you
today and am available for any questions you have.
[The prepared statement of Mr. Tangherlini follows:]
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Mr. Ose. Thank you, Mr. Tangherlini.
Our next witness is Mr. Tom Mack, who is the chairman of
the Tourmobile Sightseeing enterprise that is so ubiquitous
here in Washington.
Sir, welcome. Thank you for joining us. You are recognized
for 5 minutes.
Mr. Mack. Thank you, Mr. Chairman and members of the
committee, for extending us an invitation to appear before you.
I regret that the Tourmobile is so hazardous to you; we will
talk to them about that.
In 1967, the National Park Service issued a public
prospectus seeking concessions to operate a mass transportation
system on the Federal mall. The Federal mall is a fragile
place; the ecology is fragile and there are too many cars. The
atmosphere is causing damage to the plant life and others
there. The Park Service decided that it needed a mass
transportation somewhat consistent with the 1901 McMillen plan,
which called for a pedestrian mall and a mass transportation
system. That ideal has been sought for a long time. We don't
know if that will ever be achieved, but it is certainly
important.
We participated in the competitive bid circumstance, and,
at that time, our organization, Universal Interpretive Shuttle
Corp. I, bid and we were issued a contract whereupon we were
sued by numerous who lost, and we spent a number of years in
court. In 1968, the Supreme Court issued a decision favorable
to the Secretary of the Interior, the Director of the National
Park Service assuring that the Secretary of the Interior had
absolute control over the contract which was issued, and in
March 1969 the service began.
We extended our service to Arlington National Cemetery in
1970 at the request of the Department of the Army, and we have
been there 32 years. I acquired Tourmobile in 1981 and have
owned it since that time, and we continue to receive high marks
from the National Park Service in terms of evaluations, and
they continue to do so even under difficult circumstances.
The first time I became aware of some appearance on the
national mall related to transportation services was something
called a Museum Bus. The Museum Bus, the intention of that
organization, as I understand it, was to take people off the
Federal mall and take them on their buses to places of culture,
museums, art places throughout the city, and perhaps other
locations. That operation lasted for a significant amount of
time, I thought, for an experiment. The experiment proved an
absolute failure and it was discontinued.
I have never spoken with anyone from BID, an organization I
first became aware of when--Downtown Improvement District BID--
I received a telephone call from a Washington Post writer, who
asked me if I was aware of the Circulator program; I told him
no. Will you send me the information? He said he couldn't, but
read The Washington Post tomorrow. I did, whereupon I learned
that BID, in concert with others, but principally BID, because
they were the spokesperson for this and the potential operator,
I believe, had expressed an opinion which was stated in the
Post that they intended to begin an operation on the national
mall similar to mine; asked me my opinion about that. I told
them it would destroy my business.
I still haven't spoken with anyone from BID, and I thought
it was quite arrogant on their part to make such a statement
without even conferring with me or letting me know what they
intended to do, and asking me if I had any ideas about it or
wanted to participate in it. I don't, but perhaps that
opportunity will prevail.
The information that I received on BID and that proposed
Circulator operation is fraught with Federal funding. They have
stated on numerous occasions that the foundation of their
operation will be dependent upon tourists. Unequivocally, that
has been stated numerous times. I believe that is a serious
mistake and we oppose it.
[The prepared statement of Mr. Mack follows:]
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Mr. Ose. I thank the gentleman for his time and his
testimony.
Our next witness, Mr. Jerome Cooper, who is the chairman of
the Transit Alliance and president of Jamaica Buses, Inc., in
Jamaica, NY.
Sir, welcome. Pleased to have you join us. You are
recognized for 5 minutes.
Mr. Cooper. Thank you, Mr. Chairman. My name is Jerry
Cooper. I am the chairman and chief executive officer of Green
Bus Lines, Triboro Coach, Jamaica Buses, and Command Bus
Companies, who represent the Transit Alliance. We are private
operators of bus mass transportation services in Queens,
Brooklyn, and Manhattan in New York. Collectively, these
companies employ 2,000 people, providing daily transportation
to about 400,000 riders.
I have worked for these companies for 45 years, and, for
the past 7 years, I have been the CEO and chairman of the
Board. Although these titles and the company names may sound
like institutional corporations, they are not. The four
companies and their predecessors are, to my knowledge, the
oldest operating mass transportation organizations in the
United States. We invented mass transportation in the New York
area. These businesses were built by hard-working people and
entrepreneurs, not government agencies.
Shortly after World War I, a group of veterans found
employment in our transit system. Eventually, these veterans
became the bus drivers and mechanics who created the modern
corporate entities which today are the principal assets for
about 315 shareholders who are the decedents of these veterans.
For over 100 years private effort and capital have continuously
made efficient and convenient transportation an everyday
expectation for our riders.
Sadly, the city of New York, a recipient of enormous
amounts of Federal funding for transit, is trying to put these
companies out of business and preparing unnecessarily to lose
hundreds of millions of public dollars in the process.
Since the Federal Government began public transit
assistance, private transit companies have been swallowed up by
local government, but not Green Bus, Triboro, Jamaica, or
Command. We are living proof that private enterprise works in
transit.
Unfortunately, New York City, the bastion of capitalism,
has embarked on a program to push these private companies out
of transit. Public officials inaccurately railed that these
companies do not maintain buses adequately or care about the
safety or comfort of the transit-riding public. Yet, the city
refuses to spend more than $150 million in federally
appropriated funds to retire old, obsolete, and exhausted
equipment.
Of the 709 buses in the combined fleets, on average 80 are
out of service on a daily basis because of the need for repair
or are Told that is not financially practical to repair them.
Of the 709 buses, 98 are not wheelchair equipped and are
inaccessible to persons with disabilities. The average age of
268 buses of the combined fleet is 18 years or older. Many
parts cannot be obtained and must be cannibalized from other
equipment. These facts should be compared to the Federal
standard of a 12-year useful life for transit buses.
We operate under the cardinal rule that not a bus leaves
the depot unless we deem it to be safe and reliable. The
shortage of equipment results in overcrowding and short
tempers. The public deserves better.
The city is sitting on $150 million which has been
appropriated and is available to replace the city's outdated
fleet, but the city will not apply for these funds and replace
the buses. They won't apply for the funds because, if they do,
they must buy buses to replace the fleet we operate for them,
which they don't want to do so they can use the artificial
safety convenience and comfort crisis they have created to
prove what a bad job the private sector does in maintaining and
operating the buses. They will not apply for the funds because
the city has previously arranged to transfer the work to the
Metropolitan Transit Authority.
Although the city administration proclaimed that the city
would save $150 million in operating costs once the takeover
occurred, the most recent budget submitted to the City Council
calls for payment to the MTA of $161 million, which is
approximately $11 million more than present costs for delivery
of the same service. The city's estimate of the cost of the
takeover does not include the value of our realty or our
intangible property rights, which has been publicly placed at
hundreds of millions of dollars. It is also no secret that,
faced with large deficit, the MTA plans to cut service. To me,
this takeover is wasteful, ill advised, and badly planned.
In the limited time allowed, I can only give the outline of
a very counterproductive situation. I have submitted several
supplemental documents for your consideration, and I thank the
subcommittee for the opportunity of testifying here today.
[The prepared statement of Mr. Cooper follows:]
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Mr. Ose. Thank you, Mr. Cooper.
Our next witness is Mr. Davis Smith, who is the director of
marketing and sales of Oleta Coach Lines in Williamsburg, VA.
He is joined today in the audience by his father, Howard Smith.
Sir, thank you for joining us. You are recognized for 5
minutes.
Mr. Smith. May God bless you, Mr. Chairman, and thank you.
My name, again, is David Smith, and I am the director of
marketing and sales for Oleta Coach Lines. My parents, Howard
Smith, who is present here, and Tawana Smith founded Oleta
Coach Lines in 1986 and our family has been serving the
communities of Williamsburg, James City County, and York County
ever since.
As you have probably had a chance to read, my father and I
discussed in 2000 with the community the need of connecting
Virginia's historical triangle via a motorcoach service. In
2001 our planning began, and by 2002 Oleta began regular
motorcoach tours to Jamestown and Yorktown from central pickup
locations in Williamsburg. We then saw the need for a mass
transit service to Jamestown and Yorktown for tourists,
employees, or anyone who needed just transportation to any of
the four Jamestown or Yorktown sites. We started a trial
service in January 2003, which led up to us having a
familiarization tour with local and State level officials,
including the local transit agency, in March 2003.
Oleta was applauded by all who attended, so, with help from
the local press, our transit service officially began. Much to
our surprise, in March 2004, it was publicized that
Williamsburg Area Transport, a department of James City County,
was planning to partner with Colonial Williamsburg Foundation
and the National Park Service to start a pilot transportation
program free or charge for tourists interested in visiting
either Jamestown or Yorktown.
Operating expenses for WAT, Williamsburg Area Transport,
came through an enhancement grant from the U.S. Department of
the Interior totaling over $44,000. WAT's federally funded
buses would operate this service from Memorial Day to Labor Day
weekends, which is Williamsburg's peak tourism season.
Immediately from the start of this service our ridership
drastically decreased. On June 7th, we filed an official
complaint with FTA's regional office in Pennsylvania. After
close to 2 months from filing our complaint, and just a few
weeks before the service was over, FTA ruled that this service
provided by WAT was in fact mass transit. FTA failed to
acknowledge DOT and FTA statutes and regulations in that, No.
1, WAT was using DOT and FTA-funded vehicles; No. 2, the local
private bus operators were not consulted with in this project;
No. 3, the participation of the private enterprise was zero.
WAT, in one instance, stated in an e-mail, which we had
received through the Freedom of Information Act, that Oleta, a
private charter company, apparently has recently voiced
concerns that they were not involved by NPS, National Park
Service. This statement was made on March 2nd, close to 2
months before this service began.
FTA completely ignored two major facts: that, No. 1, Oleta
was already offering this service successfully; No. 2, per all
the documents and advertisement about WAT service, riders
needed an admission ticket in order to ride WAT's bus, which
would make this a closed door service and not open to the
general public.
The first full week after this pilot program was over, I am
happy to report that our ridership levels have increased
dramatically. Upon preparing for this hearing, on September
28th, we learned that yet another transit organization by the
name of Hampton Roads Transit had copied a passenger commuter
service that Oleta had been offering since 2001. This service
that Oleta was given by the Department of Motor Vehicles a
Certificate of Public Convenience and Necessity connected the
cities of Williamsburg, Newport News, and Hampton to relieve
traffic congestions. Upon research we learned that, on
September 7th, HRT began the same service through a grant
received from the State totaling over $848,000. This would
cover their operating expense and was also the purchase of
three new coaches.
Doing further research on the situations that have been
coming up with the transit organizations and the private
sector, I came across a document on the Jamestown 2007 Web
site. Transportation information had been collected from both
transit agencies and charter bus operators for the purpose of a
bus census in and around Williamsburg. Out of the 18 private
providers found in surrounding cities, as well as in
Williamsburg, Oleta was not listed.
We have come to the conclusion that WAT and HRT, with
support of the FTA, is trying to put in particular my family's
small company out of business. We pray that this subcommittee
will see to it that something be done to make sure that the
private sector receives maximum participation in all projects
and programs related to transportation.
Thank you for your time.
[The prepared statement of Mr. Smith follows:]
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Mr. Ose. I thank the gentleman for his attendance and
testimony.
Our final witness in the second panel is Mr Steven Diaz,
esq. He is former Chief Counsel for the Federal Transit
Administration at the Department of Transportation, now in
private practice.
Sir, thank you for joining us. You are recognized for 5
minutes.
Mr. Diaz. Thank you, Mr. Chairman. I am honored to be here.
My name is Steven Diaz. I am an attorney based here in
Washington. I have spent the past 30 years practicing mass
transportation law, half the time in public practice, half the
time in private practice. My testimony today represents my own
personal opinion of long standing and is addressed to the issue
of private sector participation in mass transportation. I will
address specifically the rescission by the Clinton
administration of the private enterprise policy of the FTA,
which was adopted in the Reagan administration. I have also
submitted supplemental documents in support of my testimony.
As the single largest source of mass transportation
investment, the Federal Government plays a central role in
encouraging and facilitating policies used around the country
to implement mass transportation programs. From the beginning
of the mass transit program, Congress has demanded that
federally appropriated funds be used to increase the mass
transportation available to our citizens, not merely to replace
private ownership with public ownership and not to duplicate or
undermine existing transportation offered by private
investment.
Diverging transit investment is a matter of getting and
keeping America moving, a practical matter, not a matter of
ideology or partisan purpose. Both great Republicans and great
Democrats have forged a policy of leveraging public with
private equity in transit.
As the supplemental materials I have supplied demonstrate,
the pursuit of the maximum use of private operators in mass
transportation long has been supported by such leaders as
Senators George Mitchell, Bob Dole, Mark Hatfield, Bob Graham
of Florida, and the late Daniel Patrick Moynihan of New York.
Indeed, David Osborne, coauthor of Reinventing Government, who
was one of the principal manager advisors to the Clinton
administration, specifically praised the FTA Office of Private
Sector Initiatives and the agency's former private sector
guidance as a model for the effective management of government-
assisted transit programs. Mr. Osborne implored the Federal
Transit Administration not to rescind its private sector
guidance.
This practical approach is shared by America's elected
State and local leaders as well. Public sector leaders, such as
Mayor Kurt Schmoke of Baltimore, Mayor Frank Jordan of San
Francisco, Governor Lawton Chiles of Florida, and Governor
William Donald Schaeffer of Maryland, among others,
specifically endorsed the policy prior to its rescission. The
strong positive effect that private sector-oriented transit
programming has traditionally had in minority communities is
underscored by the statistics cited by former Congressman Alan
Wheat in the letter he wrote to try to persuade the FTA not to
abandon its private sector guidance. In the same vein, the
Eastern Paralyzed Veterans Association noted its concern for
the negative impact upon the disability community of a Federal
withdrawal from a strong private sector participation policy.
The Office of Advocacy of the Small Business Administration
also admonished the Department of Transportation not to abandon
the private enterprise guidance. In a scholarly review of the
sources for the guidance and a reasoned analysis of its impact,
the Office of Advocacy spoke with candor and urgency in support
of the policy.
Each of these writers had a different emphasis in
supporting a strong Federal policy for the utilization of
private sector operators, but the very wide array of
commentators and their various separate reasons are themselves
indications of the scope and the importance of the contribution
that private operators of mass transportation services have
made. There is every reason to encourage such participation
and, indeed, to strengthen this important and vital element of
our national transportation infrastructure, which has always
been a mandatory, if not always enforced, feature of the
Federal transit program.
You have heard from a number of witnesses who have given a
good overview of why reform is needed. Although it is sometimes
said that the Federal Transit Administration is not a
regulatory agency--I believe that was reiterated this morning
when the Administrator said we are a grantmaking agency--it
defies common sense to say that billions of dollars of
federally appropriated funds are simply given out with no
concomitant Federal fiduciary obligation. Money is appropriated
by Congress for specific purposes, and upon specific
conditions; hence the 18 existing FTA rules already published
in the Code of Federal Regulations.
If Congress is serious about encouraging Federal transit
infrastructure investment leveraged with private equity, it
must require an implementing regulation to that effect. This is
especially true in light of the enforcement experience we have
had without such a regulation, as demonstrated particularly by
the case studies which have been presented to the subcommittee.
After all, in management in the public sector, just as in
management in the private sector, it is always a question of
getting the most bang for the buck.
Mr. Chairman, I thank the subcommittee for its interest in
my views, and I am pleased to respond to any questions you may
have.
[The prepared statement of Mr. Diaz follows:]
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Mr. Ose. I thank the gentleman for his testimony and his
presence.
All right, as we indicated in the previous panel, what we
do is we just have questions for you. To the extent that we can
get through all our questions, there will be fewer follow-on
questions. I do want to advise the witnesses that I have a note
here that between 11:30 a.m. and noon we are going to have
three votes, so we are going to go as quickly and as
expeditiously as we can. That is not to say that, if you have a
point you want to make, we are going to roll right over you. I
want you to make your points. I want you to answer our
questions. If you have a point that occurs to you, make it. All
right?
Now, Mr. Diaz, in particular, I want to start with a
question to you. Your point about the dollars, I was tempted to
offer Ms. Dorn that she could send the money out and I would
come over and I would supervise whether or not the money is
used to the purpose that it is supposed to go. I knew what the
answer would be, but I was going to offer it anyway. What is
your view of FTA's enforcement role to date of the statutory
requirements for private sector participation in mass transit?
Mr. Diaz. Mr. Chairman, clear signals are sent from
Washington that don't have to be embodied in rules to make
people act. With the recission of the private enterprise
participation policy, a signal was sent out that was received
loud and clear. You have heard many tales, some in your own
district, of what happens when enforcement is sought on
regulations since the rescission of the policy, and I think we
can safely say that it is a matter of a lack of perceived
intent, and the perception is what is a matter of policy, and
policy is what the board of directors of the United States, or
the Congress, is supposed to set.
Mr. Ose. Long story short, you are saying that FTA is kind
of giving a wink and a nudge to the enforcement provision; they
are just not doing it.
Mr. Diaz. It is a reasonable conclusion from the histories
that have been presented, yes, sir, it is.
Mr. Ose. Do you think the issuance of a rule consistent
with the other 18 rules, the purpose of which were to bring
certainty or clarity to what constitutes private sector
participation in mass transit, do you think that is a good idea
or could stand further review?
Mr. Diaz. I have been an administrative lawyer and a public
lawyer for many years, sir, and the only thing I can say to you
is that clarity is the essence of the matter, and I think that
the committee would well consider the degree of clarity that it
received in the first panel with the rules and the intentions
of the committee.
The fact of the matter is that the charter regulation, for
example, is not unclear; the standards are very plain. If you
can't look at a service with common sense and know that it is
open to the public or closed to the public, if you can't know
who is paying for it, if you can't know whether it is published
in the timetables and the schedules or not, then I would
suggest that some training is in order.
Mr. Ose. Thank you.
The bells you just heard were calling me to a vote. I have
15 minutes and, with great respect, it is likely to take 40
minutes for the two follow-on votes beyond that, so we are
going to try and finish this up. This is not to be
disrespectful, it is just the press of time. To the extent that
we can't finish up, we will be sending questions in writing to
you, and we would appreciate timely responses accordingly.
Mr. Tangherlini, on July 23rd of this year, you sent a
letter to Martz Gold Line about the proposed Circulator in D.C.
stating, ``The Circulator is an appropriate public transit
service'' and then further ``After gaining cost and operating
experience in Phase I, it is the partner group's current
intention to invite competitive bidding on Phase II services
from private contractors.'' Now, you have changed that a little
bit in your testimony today regarding Phase I in particular. My
question is, in the context of the Business Improvement
District's Circulator proposal, will that require Federal
funding to implement?
Mr. Tangherlini. A couple of things. The point about
changing it, we have changed it because we were interested in
working with the private sector providers in the city to see
what other options we could explore. Our interest is in
providing high-quality service at the lowest possible cost, and
we think that perhaps the private sector could be part of that.
We were under the impression that the buses funded from money
that had been won through a lawsuit, something called the D.C.
Rider's Trust, could only be operated by WMATA. We have learned
since that may not be the case, and we are fully interested in
exploring a proposal that might allow for private sector
operation.
Would it require some subsidy? Yes, it would, but we
propose a level of subsidy, we think, which is unique in public
transportation finance that would include private, local, and
Federal subsidy through the District of Columbia Appropriations
Bill, not through the Federal Transit Administration. No
Federal Transit Administration money would be used to pay for
the buses; no Federal Transit Administration money would be
used to operate the buses.
Mr. Ose. So, you get around the prohibition on, if you
will, the squeeze-out effect by using direct appropriations as
opposed to FTA grants?
Mr. Tangherlini. Again, we don't think there is any
squeeze-out effect. I would like someone to show me what
private sector operator is operating on K Street providing
frequent service on K Street. This is transit service from
across the town, from the Convention Center to the waterfront.
We also believe that this is just the beginning of fair
recompense for the Federal Government's closure of such streets
as Pennsylvania Avenue and E Street, separating the east and
west portions of the city, and continued closures up here on
Independence and Constitution, or at least checkpoints that
have made mobility in the city very hard due to the security
closures.
Mr. Ose. One of the concerns I have has to do with the
Tourmobile services, and, Mr. Mack, I want to followup on this
with you. Mr. Tangherlini indicates that there is no evidence
there will be an adverse impact to your enterprise. You have
30-odd years of experience here. What is your sense of that?
Mr. Mack. It is untrue.
Mr. Ose. OK.
Mr. Mack. As I told the reporter of The Washington Post
which quoted D.C. BID and others indicated that they wished to
implement the service on the national mall, and they were
intending to do it my first understanding was in 2001 and later
Circulator reports, as Mr. Tangherlini indicate they change
from time to time, the next proposed takeover in effect was in
2003. I guess they will change that to another time since it
hasn't happened so far.
But, there is no question about it. If a federally funded
entity imposes itself on the Federal mall, where our operation
is, our operation will not be able to survive. I think that
quoting the letter that you referred to, I believe in one of
the paragraphs it indicates that the Circulator expects to
impose its second phase after the Park Service issues its
report, and that solicitation of private operators may be
appropriate then.
Mr. Tangherlini probably understands that he, BID, nor
anyone else other than Secretary of the Interior, has an
authority to put any kind of transportation on the national
mall. It appears from this letter that you referred to to Martz
that they are assuming that this is a done deal. They are
proceeding and in numerous studies that this organization has
commissioned, every one that I have seen or heard of indicates
that there is a tremendous amount of money needed to fund it
and that it can't operate otherwise.
If we are talking about 90 buses ultimately when the
service is completed, with facilities to maintain those buses,
55 passenger full-size buses operating on clogged streets that
are already dangerously overloaded, I believe, this proposal
makes no sense, and it will endanger the operations of my
company and other companies also. And, as a matter of fact, I
think one of the studies commissioned by this organization
indicates that it will have a predatory effect upon the
existing transit system in order to fill the seats that they
plan to purchase.
Mr. Ose. Before we leave this issue, I just want you to
understand on both sides of this, without being judgmental, I
am watching this and I will continue to watch this, and I will
watch it until it is done or I am done, one or the other,
whichever comes first.
Mr. Cooper and Mr. Smith, if I may, you are both private
operators. I know of no testimony to the effect that your
service isn't adequate or that it is not meeting the needs of
your customers. Can you estimate the adverse economic effect to
your company if the DOT refuses to enforce on public entities
the non-compete clause portion of its grants? In other words,
if they take the Federal money then compete against you, what
position does that leave you in with your respective
enterprises?
Mr. Cooper. If by what you mean is an MTA takeover of the
lines, I assume that is what you are referring to?
Mr. Ose. In whole or in part?
Mr. Cooper. Well, if they take over the lines or partly
take over the lines and there is no increased funding to us or
there aren't any new buses purchased, we can't put those fleets
on the road. In other words, we have certain peak pullouts that
have to be met.
When you have equipment that is 18 and 20 years old, where
the bulkheads and the engines and the transmissions need to be
overhauled immediately, and you have to put those against the
wall, it does two things: first of all, we have a certain
pullout we must meet and certain other requirements we have to
meet. If we can't meet those, then, in a way, our incentive
payments, which we get from the city, is deducted. In addition,
the cost to maintain 20-year-old buses that have hundreds of
thousands of miles on them, which are falling apart literally,
it is impossible to maintain.
Mr. Ose. And, that would be the case of using MTA's
existing rolling stock? That is the situation they face, not
that you face.
Mr. Cooper. I didn't hear the question.
Mr. Ose. Your point about the cost to maintain very heavily
used equipment, that is the situation MTA faces, not the
situation you face?
Mr. Cooper. That is exactly right.
Mr. Ose. OK.
Mr. Cooper. The general manager of Green Bus Lines is here
today, and she has said to me over and over again we can't get
these buses through the door. And, we won't put out a bus that
is not safe and reliable. Now, that is as opposed to an MTA
that has unlimited funds. While they don't operate on our
lines, you can see the difference in the quality of the
equipment.
It is just difficult to make headways, it is difficult to
make pullouts, it is difficult to do any of the things that are
required. And, we did, for more than 100 years, an apparently
satisfactory to the city, but now for some reason we are an
anathema to them and I don't know how to answer those questions
anymore with them.
Mr. Ose. So, your point is that the city's competition with
you using Federal funds to keep these assets rolling would put
assets on the street that are less safe, less well maintained,
your ridership would go down, etc.?
Mr. Cooper. Well, you have just about paraphrased what we
would say. You can't compete that way if you don't have the
equipment to put on the road, you just can't. I submitted a
couple of letters from the unions involved here, and these poor
people, they have to get those buses out on the road. It is
tough to put a 20-year-old bus which needs almost a total
repair back on the city streets, but they do it, and we
maintain service and we do the best we can. But we can't keep
this up. It just can't go on.
I told the City Council that, if the MTA were to take this
over at some future date, they can't forget us in the interim
period; we need equipment.
Mr. Ose. Mr. Smith, in your enterprise same kind of
question: what is the economic impact of the FTA's blind eye,
if you will, toward the private participation requirements in
the law?
Mr. Smith. I am trying to make sure I understand your
question. As far as monetary?
Mr. Ose. Yes. What would be the impact on your enterprise?
Mr. Smith. Well, I looked at, once again, with information
that I had received from the Freedom of Information Act that I
had requested, they had 102 days worth of service for if we do
everything completely down to the tee with what they were doing
as far as 102 days, hours, they incorporated radio costs and
everything like that, they received a grant for $44,600. Our
price being a privately owned and operated company, one which
has to pay for insurance, no insurance breaks, no fuel cost
breaks, our price came to $47,000. So, you can see the
closeness of it.
If we do a per ridership, ours is on a minimum price, just
for kids, is five. On the 3 months that they did it, I think it
came out to approximately 2,000 some riders from beginning to
end of this pilot. So, at a minimum of $5 per kid, that is
about what it would be.
Did that answer your question?
Mr. Ose. Yes.
I apologize. I have to go vote. I am not going to be back
in time for us to have a timely continuation of this
discussion. I want to express my appreciation to each of you
for coming here and being candid with us, because it can't be
easy to be candid in public on issues involving this amount of
money and this important level of detail. That is the first
thing. The second thing is we have questions. I have questions
that I have not yet been able to get to ask. We will be sending
them respectively to each of you as the case suggests, and we
would appreciate a timely response to the committee.
I am a strong advocate for business. I happen to think
there is not a single product I know of that can't be more
effectively and less costly delivered by private enterprise
compared to the government delivery. I want to encourage you to
stand your ground. While I may not be here next year, I do know
people who will be here next year who share my passion for
keeping government out of successful private businesses.
Again, I want to thank you all for joining us today, and we
will send you these questions.
And we are adjourned.
[Whereupon, at 12:14 p.m., the subcommittee was adjourned.]
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