<DOC>
[108 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:95184.wais]
S. Hrg. 108-550
ENHANCING THE ROLE OF THE PRIVATE
SECTOR IN PUBLIC TRANSPORTATION
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HOUSING AND TRANSPORTATION
of the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
ON
THE CURRENT ROLE OF THE PRIVATE SECTOR IN PROVIDING PUBLIC
TRANSPORTATION SERVICES, WHAT BARRIERS EXIST TO INCREASING THAT ROLE,
AND WHAT MIGHT BE DONE IN REAUTHORIZATION TO REDUCE THESE BARRIERS
__________
JULY 23, 2003
__________
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
RICHARD C. SHELBY, Alabama, Chairman
ROBERT F. BENNETT, Utah PAUL S. SARBANES, Maryland
WAYNE ALLARD, Colorado CHRISTOPHER J. DODD, Connecticut
MICHAEL B. ENZI, Wyoming TIM JOHNSON, South Dakota
CHUCK HAGEL, Nebraska JACK REED, Rhode Island
RICK SANTORUM, Pennsylvania CHARLES E. SCHUMER, New York
JIM BUNNING, Kentucky EVAN BAYH, Indiana
MIKE CRAPO, Idaho ZELL MILLER, Georgia
JOHN E. SUNUNU, New Hampshire THOMAS R. CARPER, Delaware
ELIZABETH DOLE, North Carolina DEBBIE STABENOW, Michigan
LINCOLN D. CHAFEE, Rhode Island JON S. CORZINE, New Jersey
Kathleen L. Casey, Staff Director and Counsel
Steven B. Harris, Democratic Staff Director and Chief Counsel
Sherry Little, Legislative Counsel
Richard Steinmann, Congressional Fellow
Sarah A. Kline, Democratic Counsel
Aaron D. Klein, Democratic Economist
Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator
George E. Whittle, Editor
______
Subcommittee on Housing and Transportation
WAYNE ALLARD, Colorado, Chairman
JACK REED, Rhode Island, Ranking Member
RICK SANTORUM, Pennsylvania DEBBIE STABENOW, Michigan
ROBERT F. BENNETT, Utah JON S. CORZINE, New Jersey
LINCOLN D. CHAFEE, Rhode Island CHRISTOPHER J. DODD, Connecticut
MICHAEL B. ENZI, Wyoming THOMAS R. CARPER, Delaware
JOHN E. SUNUNU, New Hampshire CHARLES E. SCHUMER, New York
RICHARD C. SHELBY, Alabama
Tewana Wilkerson, Staff Director
(ii)
C O N T E N T S
----------
WEDNESDAY, JULY 23, 2003
Page
Opening statement of Senator Allard.............................. 1
Opening statements, comments, or prepared statements of:
Senator Reed................................................. 3
Senator Sarbanes............................................. 13
Senator Corzine.............................................. 28
WITNESSES
Irwin Rosenberg, President, American Transit Services Council,
Vice President of Government Relations, Laidlaw Transit
Services, Inc.................................................. 4
Prepared statement........................................... 28
Robert Molofsky, General Counsel, Amalgamated Transit Union...... 6
Prepared statement........................................... 55
Peter J. Pantuso, President and Chief Executive Officer, American
Bus
Association.................................................... 9
Prepared statement........................................... 62
Margie Wilcox, Co-Chair of the Paratransit and Contracting
Steering Committee, Taxicab, Limousine, and Paratransit
Association.................................................... 11
Prepared statement........................................... 136
Additional Material Supplied for the Record
GAO--Transit Labor Arrangements--Most Transit Agencies Report
Impacts Are Minimal............................................ 146
Statement of the National School Transportation Association dated
July 23, 2003.................................................. 183
(iii)
ENHANCING THE ROLE OF THE PRIVATE SECTOR IN PUBLIC TRANSPORTATION
----------
WEDNESDAY, JULY 23, 2003
U.S. Senate,
Subcommittee on Housing and Transportation,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Subcommittee met at 2:31 p.m. in room SD-538 of the
Dirksen Senate Office Building, Senator Wayne Allard (Chairman
of the Subcommittee) presiding.
OPENING STATEMENT OF SENATOR WAYNE ALLARD
Senator Allard. I am going to call to order the
Subcommittee on Housing and Transportation of the Banking
Committee.
I want to welcome the witnesses. First of all, both myself
and Senator Reed will probably have opening statements, and we
may have a lot of Members that will be coming in and out. We
will just play it by ear. When they come in, we will interrupt
the proceedings so they can make their statements.
We will have a five-minute limit on your statement. I will
just make your full statement a part of the record. We will ask
you to limit your comments and testimony to 5 minutes. We will
not enforce it rigorously, but stay close to 5 minutes if you
would please.
With that, I will go ahead and start with my opening
statement, and by the time I have finished, I have a feeling
that probably Senator Reed will be here.
I am very pleased to convene this hearing of the Housing
and Transportation Subcommittee to consider enhancing the role
of the private sector and public transportation. This hearing
will be an important part of the Committee's work to
reauthorize TEA-21, and I believe that this forum will give us
an opportunity to explore many critical issues as we move
forward in that process.
While transportation is often considered a public sector
activity, it is actually a combination of both private and
public sectors. In fact, Federal transit law calls for Federal
grant recipients to encourage to the maximum extent possible
the participation of private enterprises. I am interested in
learning how this is working.
Private contracting has the potential to save money,
improve service, and increase flexibility. Therefore, I
strongly support allowing State and local decisions regarding
competitive contracting for transit--free Federal inhibitions.
I also strongly support a level playing field with fair
competition between public and private operators when an area
chooses to contract.
That is not to say that competitive contracting is right
for every city or in every situation. On the contrary, public
transit workers are an integral part of transit service, just
as the private operators are. I hope that we all share the goal
of wanting to promote transit by investing scarce taxpayer
dollars as carefully as possible. When a public-private
partnership is the most effective, efficient means to provide
transportation services, the Federal Government should not
stand in the way.
Denver, in my home State of Colorado, is one example of an
area that made the decision to contract and has done so
successfully. In 1988, the Colorado Legislature mandated
Denver's Regional Transportation District, which we refer to as
RTD, to competitively contract 20 percent of its best service
and response to spiraling costs.
The contracting helped lead to lower costs and higher
ridership. During the 9 years before contracting, expenditures
rose 8.7 percent, while service levels were reduced by 12.6
percent. During the 9 years after competitive contracting
expenditures rose by only 4.3 percent, and service levels
increased by 34.3 percent.
Internal estimates show that RTD saved nearly $100 million
over 10 years through competitive contracting. Obviously,
something was working because in 2000, the State increased the
contract mandate to 35 percent, and the State Legislature
considered increasing the contracting mandate even further.
San Diego has also had great success in choosing to
competitively contract some of its services. In 1980, local
officials began their efforts to create competition in bus
service. Today, nearly half of their bus service is awarded on
a competitive basis. Contracted costs are about 30 percent less
than noncontracted costs. However, the noncontracted costs have
also decreased in response to the competition. As a result, San
Diego has been able to increase its bus service level since
1979 by 82 percent, while total operating costs have only risen
by 7 percent on an inflation-adjusted basis. These are just two
examples of how a public-private partnership can be an
effective approach to providing transportation services.
I am pleased that the Administration has made several
suggestions to remove barriers to competition in the SAFETEA
proposal. First, they proposed making private operators
eligible recipients of Federal formula funds, which would allow
private operators to have an opportunity to participate in
transportation development. They would also be eligible to
receive grants for the provision of public transportation
services that they define and deliver.
The Administration also proposes creating a more nuanced
enforcement tool for violations of the prohibition against
using taxpayer-subsidized services to compete against the
private sector. Currently, the only enforcement tool is for the
FTA to withhold all Federal funding. Because this is so
draconian, it is never used, which has allowed abuses to occur.
A wider range of penalties would allow FTA to better match the
penalty with the violation.
While SAFETEA makes some encouraging steps, I am interested
in hearing what further steps this Committee should consider in
regards to the private sector. Accordingly, I have invited a
number of witnesses here today to express their views on the
matter.
First, we have Mr. Irwin Rosenberg, who is a Vice President
at Laidlaw Transit Services Incorporated. He is testifying on
behalf of the American Transit Services Council whose members
provide contract service across the country.
Second, we have Mr. Bob Molofsky, who is the General
Counsel for the Amalgamated Transit Union. ATU is the largest
transportation labor union with 180,000 members.
Third, we have Mr. Peter Pantuso, who is the President of
the American Bus Association. ABA is the trade association of
the intercity bus industry. ABA members transport 774 million
passengers each year and often provide the only transportation
service to rural areas.
Finally, we will hear from Ms. Margie Wilcox, who is
testifying on behalf of the Taxicab, Limousine, and Paratransit
Association. Their members contract for a great deal of the
paratransit services and transport two million passengers in
total each day.
I am eager to hear your views regarding the opportunities
currently available to the private sector, barriers that exist
for private sector participation, impediments that exist for a
locality to competitively contract for transit services, and
suggestions for changes as the Committee moves to complete TEA-
21 reauthorization.
I want to thank the panel for being here today, and I look
forward to your testimony. Prior to hearing from you, I want to
give Senator Reed, from Rhode Island an opportunity to make his
opening comments.
Senator Reed.
STATEMENT OF SENATOR JACK REED
Senator Reed. Thank you very much, Mr. Chairman, and thank
you for scheduling this hearing. I am eager to hear from the
witnesses. We have recently received the SAFETEA from the
Administration, and I am glad because we now can begin to
analyze the Act and try to incorporate also some of the
hearings that we held last Congress. We had a series of
hearings on these issues in anticipation of the
reauthorization.
One of the conclusions from these hearings is that TEA-21,
with its flexibility, works very well, but it could use
additional resources to make it work even better across the
country. And it is my understanding that there is robust
participation in transit and that this participation exists in
no small part to the flexibility and the emphasis in TEA-21 on
leaving many service decisions to the States and to
municipalities. I think this local orientation and this local
choice is an important aspect of TEA-21's success and something
of which I am supportive.
According to research by the Transportation Cooperative
Research Program, most transit systems have some level of
private participation and find that the current laws'
flexibility suits their needs well. There are examples of both
success and failure when it comes to privatization, and my
State has experienced both, but I think it once again
vindicates the value of local decisionmaking and the
flexibility to make those decisions.
While I believe the current law provides sufficient avenues
for private participation and that there is always the
potential for increased participation, I think we also have to
recognize too that these issues sometimes bring up, either
wittingly or unwittingly, the issue of labor and its role in
the delivery of transit services across the country.
I look forward to today's testimony and, indeed, I look
forward to participation with the Chairman in the evaluation of
the SAFETEA proposal and hopefully moving in the direction of
reauthorization.
I also would note, Mr. Chairman, I believe there is a vote
on.
Senator Allard. Yes. I am just looking at it. We have a
vote to table the Hollings Amendment on the floor. We will run
down quickly, cast our vote, and get right back to you.
Senator Reed. Thank you.
Senator Allard. It will probably be about 10 minutes or so.
In the meantime, this Committee will stand in recess.
[Recess 2:40 p.m. to 2:56 p.m.]
Senator Allard. The Subcommittee on Housing and
Transportation will come back to order.
Now, we will hear from the panel members, and I would like
to start with Mr. Rosenberg, Area Vice President, Laidlaw
Transit Services, Incorporated. I understand you will be
testifying on behalf of the American Transit Services Council.
We will move down the table and call on Mr. Molofsky, General
Counsel, Amalgamated Transit Union; and then Mr. Peter
Pantuso----
Did I pronounce your name right?
Mr. Pantuso. That is very good. Thank you, Mr. Chairman.
Senator Allard. --President and Chief Executive Officer of
American Bus Association, and Margie Wilcox, Co-chair,
Paratransit and Contracting Division, Taxicab, Limousine, and
Paratransit Association.
Let's proceed with you, Mr. Rosenberg.
STATEMENT OF IRWIN ROSENBERG, PRESIDENT
AMERICAN TRANSIT SERVICES COUNCIL
VICE PRESIDENT OF GOVERNMENT RELATIONS
LAIDLAW TRANSIT SERVICES, INC.
Mr. Rosenberg. Thank you, sir.
Mr. Chairman, Mr. Ranking Member, and honorable Members of
the Subcommittee, thank you very much for allowing me the honor
to testify today on behalf of the American Transit Service
Council. I am Irwin Rosenberg. I am the President of the
Council and Vice President for Laidlaw Transit Services, one of
the Nation's largest providers of contract services, and in
fact, an operator of the
Denver RTD service, which you mentioned, Mr. Chairman and the
San Diego services. And the ATSC does provide service across
the country in virtually every community that everyone of the
Members represent here, operating approximately 12,000 vehicles
nationwide.
Although the competitive contracting market has grown over
the past two decades, primarily during 1984 and 1993, it is
increasingly evident that there continues to be attitudinal and
policy barriers toward the broad use of competitive contracting
to provide public transportation services in a very cost-
effective and efficient manner.
According to the TRB 2001 report, ``Contracting for Bus and
Demand Response Transit Services,'' 40 percent of all Federal
aid transit recipients contract for no services at all.
Competitive contracting can be a very effective tool, allowing
public transit agencies to be more responsive to its customers,
implement effective controls on cost and improve and ensure
quality service through proper performance standards.
Of course, additional competitive contracting benefits
include the shifting of risk, and the reduced cost and cost
control. As you mentioned, Mr. Chairman, in Denver, Colorado,
the difference is $21.89 per hour between the in-house
contracted service and those services provided by the
contractor.
And, in fact, in Houston, I heard Jim Cunning, one of the
board members, yesterday, just say that since they started
contracting for one division, they have saved $23.2 million
over just the past few years. It allows the public sector to
extend funds that are so necessary and limited in terms of
capital investment. It helps them to manage service quality
better. It creates a competitive labor environment, and it
allows for the public-sector resources to be appropriately
focused on planning and policy development for systems.
Opponents historically attempt to confuse the issue by
suggesting what we are advocating is full privatization. This
is not the case. We are here to ask you to support legislative
language within any legislation reauthorizing TEA-21 that
encourages the inclusion of the private sector to the maximum
extent feasible; for example, repeal Section 5305(e)(3) and
reward efficiency and increased ridership by adopting the
proposals we have submitted with our written testimony for
incentives that are tied not only to ridership, but to
efficiency also. Competitive contracting for service based on
competition does not eliminate the responsibility of transit
agencies to determine policy, plan service nor assure it is
delivered in an efficient and cost-effective manner. When the
services are contracted, agencies continue to set standards and
are responsible for the financial accountability of public
funds.
Competitive contracting does not mean nonunion either.
Thousands of employees working for ATSC member companies across
America are represented by the Teamsters, by ATU, and by SEIU
and many other unions. It has been clearly demonstrated and
proven that competitive contracting is not an attempt to avoid
collective bargaining process. In fact, consider Charleston
Area Regional Transit Authority where, in a Right-to-Work
State, they actually contracted in order to ensure that the
employees were represented by collective bargaining agreements.
American Transit Services Council members are able to
provide essential capital and extend to their customers the
value of their resources and in-depth experience through their
national purchasing relationships and innovations.
From 1984 to 1993, the Congress and Administration
initiated and supported growth and competitive contracting
through legislation and Federal policy that encouraged the use
of the private sector. FTA took a leadership role in sponsoring
and supporting private and public sector initiatives,
publications, and symposiums bringing together the private
sector and public sectors in an effort to break through
barriers and break through ideological differences. Included
with my written testimony is several success stories of
services contracted across the country. Unfortunately, in 1993,
with the change of Administrations, the rules were changed and
the early consultations that includes the private sector has no
longer been the case.
Some suggest that the competitive contract market has grown
since 1993, which may be true, but unfortunately it grew only
in part due to the passage of ADA and the requirement to, in
fact, implement ADA plans from 1992 to 1995. Many public
transit agencies chose to do this because of the complications
in the variables and the lack of financial resources. Today,
according to FTA statistics through the NTD database,
contracted paratransit services represent 70.8 percent of
operating expenses, but only 9.8 percent of the operating
expenses are for motor bus services. If it is good enough for
the disabled and elderly public, I am sure it is good enough
for the general riding public. We are looking to you for the
opportunities to enhance service.
In closing, I come before you on behalf of ATSC and those
who are dependent on transit across America to encourage you to
consider our recommendations for enhancing the private sector's
participation while you deliberate on the reauthorization of
TEA-21.
I respectfully encourage you to establish those policies
that require the inclusion of the private sector to the maximum
extent feasible, again, by repealing Section 5305(e)(3), and
mandating that FTA make a rulemaking requiring private sector
participation guidance; establish tougher and enforceable
regulations to prohibit violation of charter bus regulations
and competition by the public sector using publicly funded
capital assets; establish incentive funding available to
agencies that not only show increased ridership, but also show
efficiency in delivery of such services. Included within my
testimony are proposals of language that could be included
within the reauthorization language which, in fact,
accomplishes these goals.
Thank you very much for the honor to speak before you
today.
Senator Allard. Thank you for your testimony.
We will now move on to Mr. Molofsky.
STATEMENT OF ROBERT MOLOFSKY
GENERAL COUNSEL
AMALGAMATED TRANSIT UNION
Mr. Molofsky. Thank you, Mr. Chairman and Senator Reed.
My name is Robert Molofsky. I am currently General Counsel
for the Amalgamated Transit Union. Over the past two decades, I
have been very involved in various transit privatization
studies, forums, legislative campaigns in more than a dozen
States and the provinces of Ontario and British Columbia. In
each case, we have sought, when faced with addressing issues of
privatization, to guard against job losses, protect our
members' collective bargaining rights, and ensure the delivery
of safe and efficient transit services, consistent with local
policies and agreement.
Since 1964, the ATU, and indeed all transportation labor,
have endorsed a longstanding Congressional policy that
decisions involving the choice between public and private
transit operators should be left to local authorities who are
better equipped to make local transportation decisions. The
Federal Government is clearly best suited to making broad
public policy decisions rather than micromanaging the local
transit choices selected to meet the needs of rural, urban, and
suburban communities.
From the start of this debate to the present, we have
always believed that the role of the Federal Government should
be one of neutrality and it should not intrude on local
decisionmaking. If the private sector has an ability to provide
safe and effective service at savings to the communities, then
they should be offered the opportunity to provide their
proposals for consideration by the MPO. That is the policy
today, and we do not think it should change.
In the past in this regard, much has been made of the
statutory references to involving the private sector, to the
maximum extent feasible, when designing local and regional
transit systems. Yet Congressional intent, dating back to the
first highway transit bill in 1964, indicates that private
enterprise participation sections of the surface transportation
law were designed to protect only then-existing private
providers, rather than any future private-sector
operations.
Nevertheless, ATU has never been opposed to the provision
of transit services by private operators, so long as the
methodology and criteria for service section and final
decisions are left to local decisionmakers, consistent with
applicable laws, collective bargaining agreements, and other
pertinent arrangements. Without question, the participation of
private enterprise in the Nation's transit sector is essential
to the health and success of the industry, and we recognize
today the emerging role played by taxi and small van operations
in providing paratransit service, especially to meet the needs
of the seniors, rural residents, and those on Medicare.
America's transportation needs cannot be met by one mode alone,
as you stated, and we agree. And they certainly cannot be met
by only one sector of such mode. In fact, as noted earlier, we
do represent both public and private operators.
For purposes of our discussion, it is important to define
the term ``privatization.'' In the area of public
transportation, the term has been used to refer to various
programs, including those that provide for competitive bidding,
tendering, contracting-out of existing new or restructured
transit service. The role of the private sector in these
situations may involve entire operations or portions.
Similarly, the discussion of privatization can raise different
issues, depending on whether such plans involve fixed-route bus
service, ADA, paratransit, or specialized transit services. The
most controversial aspect, of course, involves the contracting-
out of sections of route segments or portions of existing
systems and denying
those operations the opportunity to address new or emerging
transit needs.
With respect to transit labor, two common elements through
all of the variations discussed above exist. First, we always
strive to protect the jobs of our members and second, to ensure
that any potential cost savings are properly measured and
weighed against the potential adverse effects on safety and
service. It has been our experience that mandated privatization
through competitive bidding has served to reduce the standard
of living for workers, diminish the transportation service
provided in communities and, as I shall discuss, transit
privatization has been based on questionable and at times false
assumptions regarding competition cost and the mechanisms used
to calculate these and other matters. We believe that the
primary goal of Federal surface transportation policy should be
to improve the speed, safety, and convenience of travel while
increasing transit ridership.
Privatization, however, confuses the efficiency and
effectiveness of transportation systems with lowering costs on
individual routes. One result is that privatization advocates
typically omit from their competitive cost analysis the
necessary cost of increased supervision and coordination which
a privatized route-focused approach requires.
Moreover, the underlying premise of transit privatization
plans, that private companies can reduce the cost of service
delivery and provide a chance for locally owned transportation
to find business has been proven unfounded in an industry in
which little competition exists, and we have a lengthy
discussion of actually the situation in Denver included in our
testimony.
Further, I would like to note that recent studies by the
Transportation Research Board and the GAO have documented that
Section 13(c), Employee Protective Arrangements, are not a
factor in decisions to contract-out. With regard to these labor
protections, it should be noted that these studies have
dispelled the myth and clearly substantiate the ATU's policy
that it does not unduly restrict the ability of transit
providers to contract-out.
Today, more than one-third of the agencies contract-out 25
percent of their service. Most significantly, the TRB report
indicates neither the general managers that currently contract-
out, nor those that do not, identified 13(c) as influencing
their decisions.
In 1991, with ISTEA, language was included to address
privatization abuses which were foisted on the public agencies
beginning in the early 1980's into the early 1990's. As a
result, language was included in that bill that stated that the
Federal Transit Agency could not withhold certification of the
planning programs devel-
oped by the MPO's, based on the local decisions, choices and
method, and means by which they evaluated public versus private
sector choices.
This action led ultimately to the repeal of a series of
increasingly burdensome and complex regulations proffered by
the Agency, initially in 1984 and 1987. In rescinding those
regulations following passage of ISTEA, the FTA noted in detail
the adverse impact of those policies requiring the use of the
discredited fully allocated cost methodology to analyze the
cost differences, if any, between public and private sector----
Senator Allard. Mr. Molofsky, can you please summarize your
comments.
Mr. Molofsky. It often led to exaggerated and unwise
decisionmaking where properties thought that they would save
money which, in fact, was not the case. We believe that that
language should remain, and we oppose the Administration's
efforts to remove it.
Finally, we have three recommendations that we would like
to state today. First, not only should private operators serve
on MPO boards, but also other transit constituency groups,
including transit labor, pedestrian advocates, bicycles,
transit agencies, and others. We do not believe it is wise, nor
fair, that the private operators be given an enhanced role in
the decisionmaking of transit services to the exclusion of
other interested parties.
Second, we recommend and have worked with many of our
transit employers around the country, both United States and
Canada, using labor management partnerships to address cost and
service issues in light of adverse fiscal developments.
And third, private-sector involvement in transit remains a
viable option in many instances. However, such decisions should
be made on a case-by-case basis after a thorough analysis of
the relative costs and benefits involved.
The bottom line is that Federally controlled privatization
initiated in Washington, DC, and forced on local and State
Governments, is not in the best interests of either the
Nation's commuters or its taxpayers.
Thank you very much.
Senator Allard. Thank you.
Mr. Pantuso.
STATEMENT OF PETER J. PANTUSO
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AMERICAN BUS ASSOCIATION
Mr. Pantuso. Thank you very much, Mr. Chairman and Members
of the Committee.
The American Bus Association is the trade association of
the private, over-the-road bus industry. Our members, which
number in excess of 1,000 motorcoach and tour operators,
represent 60 percent of all of the coaches on the road today.
They serve over 5,000 communities, and as you stated in your
opening statement, they move 774 million passengers annually,
more than the airlines and more than Amtrak combined.
ABA and its members have only one goal, and that is to
ensure the private bus companies are allowed to compete for
business on a level playing field and contribute to the maximum
extent possible to the transportation network in the country.
ABA's recommendations require no intrusion on other modes
of transportation and come with a relatively small investment.
We have a unique position as an industry. We are a network of
small, often family run businesses, we are the David up against
the Goliath of the airlines, Amtrak, transit agencies
nationwide who do provide critical service, but at a hefty cost
to the taxpayer.
Our challenge, which we are asking for your assistance
today, is to weave ourselves into the larger transportation
fabric of the public transportation network and defray cost to
Government.
We ask you to help us by providing a small investment in
our industry, and very prudent, and targeted programs to ensure
a level playing field. Let me outline a few of these programs.
Intercity bus travel is the only form of public
transportation available to many people, especially in rural
areas. The significant decline in rural transportation and
rural bus service has been
reversed in years past because of the existence and the success
of the FTA's Section 5311(f) program, the rural, over-the-road
bus
program, a fund which began under ISTEA and continued under
TEA-21.
A study on bus industry subsidies that is appended to my
testimony provides evidence and the growth of service under
5311 that has been spawned. Indeed, Pennsylvania and Colorado
have been leaders in using that program to increase the rural
intercity bus service, but more funds are needed to build upon
that success.
Another way to enhance private bus service is to provide a
dedicated source of Federal funding and create a network of
intermodal facilities. These facilities could be accessed by
all modes of transportation and would provide seamless
connections both to intercity passengers and to local public
transportation providers.
The Administration's reauthorization bill establishes an
$85-million Federal fund for the development of intermodal
facilities to be used as seed money in a variety of projects,
but more monies are needed.
Service to the elderly and to persons with disabilities is
also a priority for our membership. A 1998 DOT regulation
requires that virtually scheduled intercity scheduled buses, by
the year 2012, be equipped with wheelchair lifts.
Today, all other motorcoaches must provide a lift-equipped
bus to a passenger on 48-hours notice. The current $7 million
program that is available and was established under TEA-21 can
only equip 200 buses per year out of a nationwide fleet of
40,000, and we need in excess of 1,000 new lift-equipped
coaches annually.
I have appended to my testimony a recent letter from
Congressman Jim Langevin to the House T&I Committee leadership
in which he had urged for increased Federal funding to assist
our industry with compliance.
ABA also believes that Federal funds should not be used by
transit agencies to compete with private bus operators where
the private sector is willing and able to provide that service.
That is the law today. The most glaring example before this
Committee is the D.C. Government's lobbying efforts in support
of a bus circulator that would take tourists around Washington
to the monuments, to sites and to shops, with a first-year cost
of nearly $37 million and in direct competition with three
private bus operators who already run service in and around the
downtown and the Mall area.
We have provided specific legislative proposals to the
Committee that would prevent these types of abuses from
continuing, and this is one of our top legislative priorities.
Each day motorcoaches bring tourists, commuters, and
shoppers to the Nation's cities. And since just one coach with
a 24-hour stay means as much as $11,000 to the economy, it is
business that the communities seek aggressively. However, this
service is hindered by a lack of bus parking facilities and
unreasonable rules. A demonstration project to address the
parking void in most congested cities, sharing of parking
facilities with transit buses, parking and planning
requirements for MPO's, and flexibility and idling rules and
research could go a long way to making those trips and those
visits easier.
In conclusion, Mr. Chairman, the ABA and its members again
have one simple goal, and that is to ensure the private bus
companies are allowed to compete for business both fairly and
on a level playing field and provide a wide variety of
transportation service options to the traveling public at a
reasonable cost.
Thank you, Mr. Chairman. We would be very happy to answer
any questions.
Senator Allard. Thank you.
Ms. Wilcox.
STATEMENT OF MARGIE WILCOX
CO-CHAIR, PARATRANSIT AND
CONTRACTING STEERING COMMITTEE
TAXICAB, LIMOUSINE, AND PARATRANSIT ASSOCIATION
Ms. Wilcox. Mr. Chairman, thank you for inviting the
Taxicab, Limousine, and Paratransit Association to testify
before your Subcommittee. My name is Margie Wilcox, and I am
the owner of
Mobile Bay Transportation, located in Mobile, Alabama, and
Pensacola Bay Transportation based in Pensacola, Florida.
My companies provide paratransit, airport shuttle, and
executive sedan services. This is my 23rd year in the passenger
transportation industry. This year, I also have the pleasure of
serving as co-chair of the Paratransit and Contracting Division
of the Taxicab, Limousine, and Paratransit Association.
TLPA is a nonprofit trade association. We are the national
organization that represents the owners of taxis, limousines
and airport shuttles, paratransit, and nonemergency medical
fleets. We have 1,000 member companies that operate 124,000
passenger vehicles. TLPA member companies transport over 2
million passengers each day, more than 900 million passengers
annually.
I am here to speak to you about the role of the private
sector and the provision of public transit services. This
country was built on the principle of competition. A
competitive approach utilizes market forces to contain costs,
improve quality, and reduce the dependence on a single
supplier. For public transit agencies, a competitive approach
to purchasing transit services is a proven tool to assist in
maximizing existing resources and expanding services.
Yet, despite the benefits of competitive contracting, even
the consideration of contracting has become an afterthought in
the minds of many officials. A 2001 study by the Transportation
Research Board found that 40 percent of all public transit
agencies do not contract any services, even though there is a
legislative requirement to utilize private operators to the
maximum extent feasible. An alarming 30 percent of these
transit agencies are led by general managers who state that
they never even consider contracting.
There is an important role for the private operators like
myself to play in providing public transit services. In our
written testimony, we list six legislative initiatives. We urge
the Senate to include in its transit reauthorization bill. I am
going to summarize our three most important recommendations.
First, the anticompetitive and antiprivate sector planning
provision, Section 5305(e)(3) of the Federal Transit Act needs
to be repealed. The President's reauthorization bill, SAFETEA,
included the repeal of this provision by rewriting the planning
section of this Act, thus, eliminating this provision. The law
and Congressional intent mandate a role for private operators
in planning for public transit services. Yet, at the same time,
this section explicitly prohibits enforcement of the law. We
believe that the best path to more efficient public
transportation is to have all stakeholders, such as local
officials, consumers, public transit operators, private transit
operators, and labor included in the planning process. We do
not advocate excluding anyone. We urge the Senate to support
repeal of this section.
Second, we request that you require the Departments of
Labor and Transportation to amend their administration of the
Federal Transit Act labor protections. This will make them less
of an obstacle to the efficient and effective provision of
public transportation services.
There are four core actions that should be taken as
follows:
Number one, it is very often asserted that a change in con-
tractors, resulting from a new company winning a competitive
bid, requires the new contractor to adopt the workers, work
rules, and wage rates of the former contractor. We ask the
Senate to address this carryover of the workforce issue by
declaring that a change in contractors is not an event that
gives rise to Section 5333(b)
protections.
Number two is very similar to number one in that we asked
the Senate to make it clear that there is not a required
carryover of workforce in public-to-private transitions, where
no employees are dismissed as a result of a Federal project.
Number three, we asked the Senate to clarify that binding
interest arbitration is not a required provision under Section
5333(b) and that other dispute resolution practices, such as
fact-finding, are acceptable.
And, number four, we ask that you limit the review of the
Federal transit grants by Federal Transit Administration,
eliminating the current practice of subjecting FTA grants to
review, not only by DOL, but by private entities, which are the
national offices of the relevant transit labor unions.
Our third legislative initiative is to ask the Senate to
direct the Federal Transit Administration to issue private-
sector participation guidance. There is ample evidence that the
private-sector participation guidance developed by the Reagan
and Bush Administrations was a great success. Increasing
competitive contracting of public transit services from $10
million to $500 million per year in the course of one decade.
Since the Clinton Administration rescinded this private-sector
participation guidance in 1994, consideration of the private
sector has stagnated, requiring the FTA to conduct a rulemaking
to reestablish private-sector participation guidance would
result in increasing the efficiency and effectiveness of public
transit operations to the benefit of all transit riders.
Mr. Chairman and Members of the Subcommittee, transit
riders will benefit significantly if our six legislative
recommendations are included in the transit reauthorization
legislation.
Thank you again for having me. I appreciate it.
Senator Allard. I want to thank you all for your testimony.
I would like to break down my question into two parts. The
first question I would like to direct to Mr. Rosenberg, and Mr.
Pantuso and Ms. Wilcox.
Your testimony indicated that you are supportive of
competitive contracting. Do you believe that competitive
contracting will solve all the cost problems that public
transit faces today? If you could give me some examples of why
or why not, I would appreciate it.
Mr. Molofsky, the transit labor has been characterized as
being opposed to competitive contracting. Are there
circumstances where such competition might be acceptable to
transit labor? It would be helpful if you could share some
anecdotal evidence. Mr. Rosenberg, you may start off.
Senator Sarbanes. Mr. Chairman, before Mr. Rosenberg----
Senator Allard. Oh, I am sorry. Do you have an opening
statement you would like to make?
Senator Sarbanes. Well, I did, but I do not want to intrude
into the questioning. I was going to put it in the record.
Senator Allard. Go ahead and make your statement.
Senator Sarbanes. All right. Because I have to----
Senator Allard. I am sorry. I should have recognized you,
and I apologize for that.
STATEMENT OF SENATOR PAUL S. SARBANES
Senator Sarbanes. Mr. Chairman, we welcome the panel. We
appreciate their contributions, and we will certainly give
careful study to all of the statements.
I do want to observe, though, that the private sector is
currently involved in many aspects of public transportation. Of
course, this hearing focuses on the one specific way, and that
is the provision of transit services, and I want to say just a
few words about that. Before I do that, I should note that
private companies make the transportation equipment, they
engineer, design, and construct the systems, they develop the
properties near the transit stations which often bring
significant economic and environmental benefit to the
community.
We have a very good example of that right here with
Metrorail of public-private partnership and the financing of
the New York Avenue Metro Station which is scheduled to open
next year, and I think is an interesting model to look at.
On the provision of the transit services themselves, the
Transportation Research Board, which has been referred to,
surveyed transit agency practices with regard to contracting-
out transit services to private or nonprofit providers. They
reported, ``Transit contracting is neither rare, nor monolithic
in practice. Hundreds of transit systems of all sizes and types
now contract for some transit services, and many have done so
for a number of years.''
I must say, in my own State of Maryland, there are numerous
private and nonprofit organizations currently providing transit
services around the State, actually in both rural and urban
areas.
The TRB study, the Transportation Research Board, also
found that agencies have had varying experiences with
contracting-out. Some have proven to be very effective. Other
agencies have cited concerns about the quality of service and
the necessity to closely oversee. That is what one would expect
because obviously there are going to be, I presume, variations
in quality.
The structure we put in place in ISTEA and in TEA-21
allowed valuable experimentation to take place around the
country with regard to the use of private contractors to
provide transit services. There is a lot of flexibility under
current law for local officials to design the mix of publicly
and privately provided services that will best meet local
needs.
Of course, we need to look at this situation very
carefully. There is an issue here, of course, of where the
locus of decisionmaking will be in terms of local officials and
the judgment or will it be made at the Federal level and simply
passed on down the line to the local level. We have tried to,
by and large, provide flexibility at the local level for making
these judgments, but I am prepared with others to look
carefully at that question.
I must say my own perception is that the arrangements we
have established have worked pretty well. That is not to say
they are perfect, but I think they have worked pretty well. I
think riders have benefitted significantly. There has been an
enormous increase in the number of people using a transit for
transportation purposes, and I think we need to be certain that
that trend continues.
Thank you, Mr. Chairman.
Senator Allard. Thank you very much for your statement,
Senator Sarbanes.
Do I need to repeat my question?
Mr. Rosenberg.
Mr. Rosenberg. Thank you, Mr. Chairman. I believe your
question was will it solve all of the problems, and the answer
is, no. I think it would be foolish for me to say that by
contracting for service all of the problems will go away in
terms of cost control, but it is one of the very important
tools in a general manager's or a public agency's toolbox that
needs to be considered. In many agencies, it is not considered.
In Dallas, recently, the contractor, the public board there
chose to eliminate 12 percent of the contracted service in
order to retain 4 percent of the workforce because they chose
to retain those employees that were employed by the public
agency rather than ensure that 12 percent of the riders got
service. So it was a decision to protect workers, rather than
to protect riders.
In Santa Clara County, California, the Valley
Transportation Authority, currently has decided to eliminate 21
percent of its service rather than even consider the option of
contracting for service. So many riders will be left stranded
without the ability to get to work. Again, in order to protect
public workforces, they chose not to look at contracting as an
option.
So what I would say to you as virtually every State in the
United States looks at the options of reduced funds as a result
of the economic conditions and has to consider, and one of the
first places they look at is raiding public transit dollars
that as agencies do not consider this an option, it is really
irresponsible on their part.
And there are opportunities for partnerships, as you said,
in San Diego, in Denver, Colorado. Yes, there have been
failures, as has been pointed out, but there have been many
successes, and I know of very few public agencies also that
have not had their fair share of failures and successes. We
learn from those. Those are all learning experiences and
hopefully we improve, and those challenges get less and less as
we go on.
I would say that the answer in a nutshell is, no. It does
not solve all of the problems, but it is a very important tool,
and without your support, without the Senate's support in
ensuring that there is a guidance, as was stated by others, it
will not happen.
And ridership will be reduced and will continue to decline,
and it will result in people being left without those necessary
services. Whether it be the frail elderly, the disabled, and
the people that are very transit dependent because general
managers across the country, as was stated, over 30 percent
have not even considered contracting, according to the TRB
study, as an option, and it is a very important tool in the
toolbox.
Senator Allard. Mr. Molofsky, do you want to give us your
view as to whether competition would be acceptable in some
instances?
Mr. Molofsky. Yes, but before I do, I think I would
question whether the decisions made in Dallas or Santa Clara or
elsewhere, with respect to choices of service, and savings, and
transfer of work from public to private or vice versa should be
the subject of oversight by the Federal Government; those are
local decisions that should be respected, and that in fact is
the policy that we have always taken, that the decisions, as
Senator Sarbanes and others have said, and as the Congress has
repeatedly affirmed, and as was true when the Act was first
legislated, that the choice between public and private
operators is for the local communities to decide.
In terms of the standards by which such competitive bidding
might take place, I would underscore that our position is that
we are not opposed to competitive bidding. The question is what
standards are applied, what policies are adhered to, why is it
being
considered, who is initiating it and whether it is either
forced or imposed, rather than the subject of a local decision.
The problem we faced in many communities in the 1980's was
that the Federal Government, FTA was imposing a discredited,
fully allocated cost economic system onto the properties and
threatening, and there were examples, rather, of cases where
FTA leveraged its ability with respect to the distribution of
funds to compel certain decisionmaking that might not otherwise
have taken place.
We have a debate ongoing, and with respect to the city of
Denver and its contracting-out. It was one of the earliest
experiments in 1988 and 1989. When it was designed, it was
intended to reflect the best opportunities for the private
sector to provide service.
You had mandates of 25, and as you noted, it went up to 35
percent, and in doing so, the State legislature required that
that 35 percent be representative of all types of service in
the community.
Yet the history shows that several of the assumptions
underlying competition did not maintain themselves in the city
of Denver. You had a shrinkage with respect to the number of
competitors. So you had a loss, not a gain, of competition.
There have been economic studies that have shown that the
city experienced cost increases and not decreases. We are not
saying it was right or wrong. We think that the community
should be allowed, free from any Federal role, to have the
flexibility to make its own choices based on its own policies
and criteria. The bill currently allows for that, and we do not
see it as a problem requiring any modification.
Senator Allard. Mr. Pantuso and Ms. Wilcox, would you
respond, please.
Mr. Pantuso. Mr. Chairman, in direct answer to your
question, I am sure the competition does not solve all of the
problems, but I answer in response to the members that we have
at ABA and the type of businesses that they operate.
Most of our members in the motorcoach industry are small
family businesses. They have sometimes five or ten buses, but
many times, they have only one, two, or three buses. They are
very small business people. For them, competition and the
ability to be at the table and participate, whether it is for a
charter contract or for a wedding contract, a very small move
for most people, but for them it is their life blood. They have
gone through 2 years of depressed sales. After September 11, we
saw business go down as much as 10 percent in the year 2002,
and again probably another 10 percent this year.
And while competition may be incremental in the scope of
things or in the scope of other publically funded systems, to
our members having that extra day or extra 2 days or 3 days of
bus movements can mean the bus payment and their survival at
the end of the month.
Senator Allard. Ms. Wilcox.
Ms. Wilcox. Mr. Chairman, I think it would not solve all,
but perhaps some of the problems. And when you have some of the
cost problems monumental in scope that seem to be growing
across the United States with transit costs, I think that the
more people you have, you invite to help you work on the
problem, the more chances of success in solving it.
So with the invitation and having the participation of
private operators like myself that sometimes work with limited
resources, we can be more much more creative in solving some of
the needs of the passengers.
Senator Allard. Would you agree that we could summarize all
of this by saying that none of you really disagree that
competitive contracting of public transportation can be cost-
effective in some situations and State and local entities
should be given the choice as to whether or not to engage in
competitive contracting without Federal disincentives. I think
everybody would agree with that at the table?
Ms. Wilcox. Yes, sir.
Mr. Molofsky. I think that is the situation today. The
question is whether ``should'' means that you might require
that service be competitively bid. I think the decision in the
first place should be one of local community determination.
Senator Allard. Yes. We just want to make sure that they
have that opportunity to do contract bidding. Everybody agrees
on that, including you, Mr. Molofsky; is that right?
Mr. Molofsky. I do not understand if that means that you
are suggesting that there is language in the statute today that
needs modification. There is sufficient flexibility today to
empower the local communities to make those choices free from
any Federal intrusion or imposed standards.
Senator Allard. Let me go on to Senator Reed.
Senator Reed. Thank you very much, Mr. Chairman.
And thank you for your testimony. It strikes me that one of
the dilemmas that we all wrestle with, but more precisely that
local transit agencies wrestle with is that the nature of
public transit is that the system has aspects that are not
economical. Indeed, that is why it has to be a public system,
but they have other services and other routes where you can
make a profit. And transit systems have to make judgments about
how they fund their overall operations, and sometimes I would
think localities would decide, well, we could contract this
out, and that positive revenue could be applied in other parts
of the system.
To make a long story short, and this is a long story short,
I think that is one reason, frankly, that we have made these
decisions local decisions because of, one, the complexity
inherent in transit planning, and, two, the different
communities around the country.
The other aspect I would say about the localities is that
by my rough estimates the Federal Government contributes about
47 percent of capital to transit systems, and after the TEA-21
Act, we eliminated operating subsidies for cities or
communities over 200,000. So essentially, it is the local
nickel we are talking about more than the Federal nickel. And
in that case, too, I think that argues for a local response
rather than a Federal scheme.
Looking at the language of the 5305(e)(3), it essentially
says that the Secretary may not impose his or her criteria upon
the local community when it comes to privatization, and I think
that is consistent with both the nature of the issue and also
the funding that we have seen.
But what I think this whole discussion has raised to the
forefront is the issue of who makes the decision, local or
Federal. But let me just go to some specific issues that have
come up in the testimony.
In terms of the planning organization, the MPO, Mr.
Rosenberg, you are suggesting that there be participation by
private entities. Would you also agree, and I think you heard
other panel members say, that environmental, labor, and other
types of groups should be represented also?
Mr. Rosenberg. I believe that every interested party should
be at the table. As someone who participated back in the early
1980's as the Chairman of the Los Angeles County private sector
forum for many years, we saw a tremendous number of
opportunities come as a result of all parties being at the
table and having the opportunity to communicate and to talk
about the issues. Many contract opportunities came as a result
of that, and many possible failures were prevented by having
all of the appropriate parties at the table.
So, I think it is critical that, particularly representing
ATSC and the private sector, that the private sector be at the
table and that all interested parties be there for
communication.
Senator Reed. So, you would not object if there was a
directive legislatively for private operators, that it also
should include other groups specifically. You would not object
to that.
Mr. Rosenberg. I would not object. I think you would have
to review it to see what groups would be participating at the
table, but I do strongly support the idea of having the private
sector at the table.
Senator Reed. And, Mr. Molofsky, I think you obviously
stated that going forward.
Mr. Molofsky. Yes.
Senator Reed. One of the other issues that comes up, and
again this gets into the local nature of the decision of at
least the current law is that, as you point out in your
testimony, one of the thoughts behind the original proposal for
privatization was that many local forums would participate,
like Mr. Pantuso's family organizations, family companies. It
seems that in many cases, these are really regional or national
groups that are really taking up the privatization challenge
and being awarded a contract. Is that an accurate assessment?
Mr. Molofsky. Yes, I think it is. What we have found when
we have looked at the history behind most of these cases, it is
advanced as if there is this pure economic theory that pure
competition will exist and that you will have a half-a-dozen, a
dozen, or more private operators submitting bids, and you will
evaluate them. But in practice it does not work that way. We
have had over time an experience where, if not with the first
bid, certainly thereafter that there is a consolidation of
operations.
In Denver, for example, a number of the companies that were
involved in the beginning bought each other out, and so you had
a sharp reduction in competitors.
Most recently, the national companies, I should say
international companies that have been involved, have
principally been organizations based in the United Kingdom and
Canada. There has been a recent history of acquisitions where
Ryder has purchased ATE and National Express in the United
Kingdom, and has purchased ATC and the other major competitor.
Coach USA has also been acquired by Stagecoach, which is
another United Kingdom property.
So, you have a massive consolidation of private operations,
that is, with respect to fixed-route service. I would agree
that there is a multitude of private operators out there in the
paratransit field and certainly in the taxi area, but that is
not the experience in terms of regular transit operations.
Senator Reed. Which raises another question, if I may, just
for Mr. Pantuso and Ms. Wilcox. The nature of your, and I do
not know the nature of business as well as you do, Mr. Pantuso,
but the nature is not fixed-routes, but specialized services
that would complement a basic transit system; is that a fair
description?
Mr. Pantuso. It is a combination, Senator. All of the major
fixed-route carriers in the country, and there are about 100,
belong to our association. They actually belong to another
group that we manage called the National Bus Traffic
Association. It is a clearinghouse for the fixed-route
carriers. There are few nationwide companies other than
Greyhound, and we have also got large regional carriers and a
lot of smaller ``mom-and-pop'' carriers.
Senator Reed. But in numbers, the bulk of your members are,
as you describe them, the family businesses with five, six,
three, or four buses whatever.
Mr. Pantuso. Absolutely. Only two carriers are publicly
held companies. And to go back to Mr. Molofsky's example, there
is a lot of change going on in the industry right now, and even
some of the biggest companies are going through divestiture.
Coach USA, which has Bonanza, and Patuxent in Rhode Island and
other companies along the East Coast are going through the
process now of dividing those companies back up into smaller
regional carriers.
Mr. Rosenberg. Thank you.
Ms. Wilcox, it is the same basic question. Your members
would not be prepared to assume the full range of transit
services that most transit agencies have--fixed bus routes and
things like that--but you are really competing about selected
aspects, paratransit, elderly transit, et cetera; is that fair?
Ms. Wilcox. Well, that does make the bulk, taxicabs and
small companies like myself, which I am regional, even though I
am a small, single company. I own Mobile Bay and then I am also
in Florida. So when we get into large regional, I could be
considered regional, but I am very small. And then we have the
range of services of the nonemergency fleets, taxis, and van
service. And then we also have some members that do own motor
coaches. So there is a large range of the services that are
private and membership could provide.
Senator Reed. But it strikes me, again, subject to your
comments, that you would complement basic services of a fixed-
route transit system, the bus system----
Ms. Wilcox. An example in, I guess it was Phoenix that when
they were considering stopping their Sunday service, instead of
ceasing the Sunday services, they decided to go to a demand
response so that the people that did need Sunday service still
had it available to them.
So there are a lot of times when companies and services
like myself make good sense to the passengers.
Senator Reed. I assume that that decision was made in
Phoenix because they sensed a local need, and they carried it
out.
Ms. Wilcox. Exactly.
Senator Reed. Thank you.
Thank you, Mr. Chairman.
Senator Allard. Thank you.
Mr. Molofsky. And I would note that 13(c) was not a
hindrance, and I do not want the comments about 13(c) to go
unaddressed, to the extent that there is a significant amount
of contracting at the same time as the employee protections are
properly factored into the decisionmaking.
Senator Allard. We will go ahead and move on. Right now, I
would like to address this question to Ms. Wilcox of the TLPA,
and then I will give all of the other witnesses that may care
to respond the chance to do so.
Right now, transit law already calls for recipients to, and
I pulled this right out of the law, encourage, ``to the maximum
extent feasible, the participation of private enterprise.''
Do you believe that this is the case? And are there
specific examples where this requirement is not being followed
that you may be aware of ?
Mr. Pantuso. I am sorry. Repeat the question, please.
Senator Allard. Currently transit law calls for recipients
to encourage to the maximum extent feasible, participation of
private enterprise. In other words, they want you to seek out
every possible way you can to include private enterprise. Do
you believe that this is the case for recipients of Federal
grants and are there specific examples where this requirement
is not being followed?
Mr. Pantuso. I think there are some areas that they do
encourage private involvement, but no, I do not think that to
the maximum extent feasible private companies are included.
Senator Allard. Would anyone else care to respond?
Mr. Molofsky. Yes. When that language was included in the
legislation beginning in 1964 there was discussion on the floor
of the U.S. Congress regarding its intent and purposes. Senator
Williams, in his remarks with respect to the language that you
have just quoted involving the private sector to the maximum
extent feasible, noted and emphasized that the aim of that
provision was to assure fair and equitable treatment for
private operators that were providing service at the time the
statute was enacted. In a broader context Senator Williams made
it clear local decision makers and not the Federal Government
would decide case-by-case whether mass transit services should
be provided public or private.
Senator Allard. The question is, do you believe that they
are encouraging the participation of private enterprise to the
maximum extent feasible?
Mr. Molofsky. I think the statute today is reflective of
Congressional intent and that the communities today have the
flexibility to make choices that are in their best interest.
Senator Allard. We can tell who the attorney is at the
table, he cannot answer a question.
[Laughter.]
Mr. Rosenberg.
Mr. Rosenberg. I am just a former bus driver, so let me see
if I can answer that question, Mr. Chairman. I think as I said
earlier, I do not believe it is occurring. I think if you look
at Santa Clara as an example, as I stated before, or you look
at Dallas, you look, it is happening in Birmingham. My own
experience in Thousand Palms, California, where the agency went
through a bidding process and at the end chose to simply take
it back in house and now the general manager is under close
scrutiny for a number of issues including improper use of
Federal funds. Sacramento RTD, where recently the RT chose to
take away a privately operated service using Federal public
funds to take over a commuter service at much higher cost, the
Los Angeles County Metropolitan Transportation Agency--do I
need to say any more--at the cost of over $100 per hour.
Several studies have been demonstrated that they could reduce
their cost simply by keeping all of their labor agreements in
place, and just transferring service to a private operator to
be operated at a savings of more than $25 per hour. That is
simply not wages and benefits savings. That is just efficiency
savings.
And the fact that the TRB study says that 30 percent of
GM's have not even considered contracting, and that 40 percent
of agencies across the country that are Federal recipients do
not contract. Clearly without a guidance, it is not being used
to the maximum extent feasible. So, I think the answer is
clearly no, it is not being done in cases where it should be.
Senator Allard. Mr. Pantuso.
Mr. Pantuso. Mr. Chairman, for the over-the-road industry,
the motorcoach industry, I think what we see more often is not
an issue of whether we are included or not, it is whether the
willing and able rules or the charter rules are enforced so
that we can
participate in the process, so that we know when business
oppor-
tunities are available, so that we can provide services when
appropriate.
Senator Allard. Ms. Wilcox, I have another question.
Private sector companies such as your members, already operate
over three-quarters of all paratransit service provided by
public transportation agencies. There must be some good reasons
why so much paratransit service is provided under contract.
What do you think are the main reasons why transit agencies
contract so much for services such as those which your
membership provides?
Ms. Wilcox. If you would permit me to be so bold, I think
it is because we do a very good job, and that when you get down
to a specialized service such as paratransit, you have really
got to be attuned to the customers' needs. And it is not that
the transit industry is not attuned to their needs, but for
example, last month one of our dialysis clinics was going to
shut down for renovation. Fourteen or so of the passengers in
one of the cities that I do business in were going to be
located outside of the guidelines of the transit bus system, so
therefore their ADA service would cease. Well, upon hearing
that from one of the call takers, I immediately contacted the
general manager. We identified which customers that would
affect. We contacted the mayor, and we worked together to
provide a solution for those 14, 15 passengers that otherwise
were going to miss some of their life-sustaining treatment, or
perhaps have a scattered approach to getting there.
So, I think that when you are a small business, you are
close to it. I answer the telephone. I think the specialized
paratransit services, that is the reason why it has been so
successful. We are very close to it.
Mr. Rosenberg. Senator Allard, if I could add? I think that
the reason, because we do a lot of that as well, is that they
looked to us when ADA was implemented for the expertise, for
the ability to control cost, to get the flexibility and
responsiveness. And I also think that there was an incentive
provided. The fact that public transit agencies could
capitalize their paratransit cost and the maintenance cost and
leasing of vehicles, that gave them the incentive that was
needed in order to look at contracting as an option because
those were costs that could be covered by what they may have
felt was a mandate that was not funded.
Being able to capitalize that, the incentive that was
provided, such as the incentives that we talked about earlier
in terms of ridership and efficiency, that is what has
promulgated them to look at that. There were a lot of
variables, and they had to act very quickly.
Just to give you two examples, I know where we operate and
where I had supervised service in Orange County, California,
when I was VP of Operations, and we continue it in Las Vegas.
We operated combined between those two over 110,000 trips a
month ADA service. In both cases we helped the agencies achieve
0 percent denial. That talks to the expertise, and I am sure
that you know of many cases across the country where people are
alleging civil rights violations as a result of public transit
agencies being unable to meet the denial expectation of the
regulations relevant the ADA. We in the private sector are
helping them to achieve that.
Senator Allard. Senator Reed.
Senator Reed. Thank you, Mr. Chairman. I think the last
round of questions was illustrative to me. It seems, at least
in the issue of paratransit services, there is maximum feasible
private participation. That is what you said, Ms. Wilcox. That
is what you said, Mr. Rosenberg. This issue of maximum feasible
participation, I think it is one probably relative to what
service you are talking about. I do not think anyone here would
necessarily jump up, certainly taxicabs or the intercity buses
and say, we want to run a subway system or we can run a subway
system, and that is a transit system.
Really, the right issue here in terms of feasibility is, do
the people that are authorized by law think it is feasible and
can they defend that to their passengers and everyone else.
I think also, just a comment about these labor protections.
I think the notion that we would deny people the protection of
a contract that they have entered into, a labor contract,
simply on the change of management, that they would lose their
benefits because of the change of management, to me is unduly
harsh. I mean they are there in good faith. They bargained for
this. They are working. Just because the ownership has changed,
they lose those protections, would be, I think unfortunate.
Just those comments, Mr. Chairman. Thank you.
Senator Allard. Thank you.
I have some more questions. Mr. Rosenberg, over three
quarters of paratransit service is competitively contracted and
only about 10 percent of fixed-route bus service is provided by
private companies. Would you comment on why such a disparity
exists?
Also, in answer to the question--and this would be for all
the members of the panel--are there different barriers to
contracting for different modes of transportation, or are the
barriers basically the same across all modes? Mr. Rosenberg.
Mr. Rosenberg. Well, I think, as I stated in my initial
testimony, I think there are attitudinal and policy barriers.
There is also the lack of incentives for fixed-route services
to be contracted. I think without some type of policy guidance,
it does not occur. Ten percent of the fixed service to be
contracted, with such a significant cut going across the
country, and the economic conditions, just again seems
irresponsible. I think that we both are trying through our
associations. I know all of our associations make the attempt
to try and change some of the attitudinal barriers.
Just yesterday I had the privilege of moderating a panel
before the APTA Board members. The Board member who is the
Chairman from CARTA, Mr. Patterson Smith, stood up and said,
``I am talking to the Board members now, not the staff,'' to
try and make sure that the message could get across that it is
the Board members that set the policy, and often those
opportunities are not presented to them on a local level. The
general managers do not do that, and they are not given the
incentive and guidance.
I think in order to encourage that again, I am not just
saying here that you do it through a policy, that is not what
we are saying. A policy is just one aspect. I think that you
have to provide incentives. You cannot just give incentives as
proposed within SAFETEA, with all due respect to the
Administration's proposal that says, we reward you for
ridership increase year over year, because that is just taking
good money and throwing it after bad. You have got to make sure
that people are efficient. Say, show us that you are going to
be efficient in increasing ridership. We want increased
ridership. We want more people in the seats. But let us see how
we can extend that dollar and stretch it because we have many
people out there that are very dependent on transit. Again, the
examples that I gave you where people are not considering it,
it would just seem irresponsible when you have to cut service
to someone who has to get to their doctor or they have to get
to their work, and they have no other option but transit, you
are going to cut it simply in terms of looking at the workers.
I want to respond that this again, as I said before, is not
an issue or whether it is labor versus nonlabor. We have many
labor agreements. Typically, in all of our fixed-route
operations, there is either an agreement with the Teamsters,
ATU, the Transportation Workers Union, or SEIU. Many of our
paratransit operations are unionized. Why are some not? Because
in many cases they may, in rural areas or suburban areas, have
just 3, 4, or 10 drivers. It is not even cost effective and
economical for labor to go in there, and they do not go in
there to try and set up a labor agreement to protect those 3, 4
or 10 employees. This is not about trying to reduce wages or
reduce benefits or not protect the collective bargaining
process. This is simply about trying to stretch the dollar, and
I think that the reason that 10 percent are not contracted is
that traditionally, those fixed-route general managers have
been very protective of those fiefdoms for many, many years,
and are reluctant to look at that as an option within their
toolbox even though it exists. They were mandated to look at
ADA paratransit. They had to respond quickly. They had to do it
as cost effectively as possible, and you gave them the
incentive to do it through providing that capital funding for
the contracting of services.
Senator Allard. Mr. Pantuso.
Mr. Pantuso. Mr. Chairman, I would just say that from our
experience, from our members' experience, the opportunities do
exist but they exist differently on a location-by-location
basis. I can tell you in the State of Maryland, for example,
there are tremendous opportunities for local private companies
to be engaged in moving people, primarily in doing commuter
work from suburban Maryland into DC. There are probably 7,500-
10,000 individuals that commute on private coaches every single
day into Washington, DC, taking 5,000 or more cars off the
highways, reducing air emissions, and congestion.
But at the same time, the example that I gave in my
testimony, in downtown DC, WMATA wants to initiate the
circulator system and create a new bus system, putting 80 new
vehicles on the mall area, when we already have three companies
that already provide this service, it seems unconscionable to
me. So it is on a location-by-location basis.
Senator Allard. Ms. Wilcox, and then Mr. Molofsky.
Ms. Wilcox. Mr. Chairman, I think there are barriers even
in paratransit. I guess the first example that comes to my mind
is my own personal 13(c) experience in my Pensacola, Florida
location. I was awarded the contract on an emergency basis.
When we were in a dispute with the union, I was given a call
basically from the manager saying that due to the grants being
held up or possibly being held up by the people that review
that, and I understood that to be the union, that possibly the
funding for the entire transit system in Pensacola would be
halted. They would not receive any of the monies, not only just
the monies to fund the ADA service. So there was somewhat of a
leverage used to get me to conform to what they wanted, so I
think that was a major barrier, and that was not really one
of--the $13,000 I spent on attorney fees was not a part of my
budgeted bid.
Senator Allard. That was a decision made here in Washington
by the Department of Labor as opposed to a local decision?
Ms. Wilcox. Yes, sir.
Senator Allard. Mr. Molofsky.
Mr. Molofsky. I would suggest that the description of the
history involving that grant is at best incomplete and somewhat
exaggerated from the full story's facts. Under the current
system with respect to 13(c), no grant can be held up by the
labor unions or anybody else. They have to be issued and
released within 60 days of their filing at the Department of
Labor, no matter what the underlying issues are. That grant
ultimately was. There were some complex issues involving the
transfer of employees and work from one contractor to another,
and questions arose about the existing labor agreement. But to
characterize that experience as one where the unions were
exercising undue leverage I think is not true. To characterize
that as the unions potentially taking a position that would
deny funds to the city of Pensacola is not true. And to suggest
that funds with regard to any issue raised in connection with a
pending 13(c) grant could result in the withholding of Federal
funds is just not the case. The regs do not permit it. We do
not seek it.
I would just suggest that if the Committee is more fully
interested in that history and circumstance, we can provide a
full accounting of that case.
Senator Allard. Mr. Molofsky, that is a decision that was
made here in Washington, and you testified earlier that you
support local decisionmaking. Do you not find that
contradictory?
Mr. Molofsky. The decision to release the funds to
Pensacola by the Federal Transit Administration was done in the
normal course of its grant proceedings.
Senator Allard. That is true, but it is a standard that was
imposed here in Washington and its rules and regulations are
forced as a condition of the grant, and that takes away local
decisionmaking. Obviously, they worked it out locally, and then
it was delayed here in Washington. Do you think that is
appropriate?
Mr. Molofsky. First of all, it was not delayed, and second,
we were working based on the local facts and circumstances to
try and resolve that issue. It was not an imposed determination
from Washington. It was reflective of trying to ensure the
rights of the employees in order to allow the grant funds to be
spent wisely.
Senator Allard. I do not want to get into 13(c) in this
hearing, but we have had hearings in the past on 13(c), and we
have had a number of witnesses in the past come and complain
about how 13(c) was applied, how it took precedent over local
decisionmaking, and how local contracts, once they were agreed
to, could not be applied. So, I guess my feeling is that it
does stifle innovation, and I guess you do not have that view,
and that is understandable. The other members of the panel want
to discuss whether or not they think this stifles innovation.
Mr. Molofsky. Our view is that 13(c) does not stifle
innovation, but let me amplify that if I may.
Senator Allard. Okay.
Mr. Molofsky. The history of transit in the United States
over the last 100 years has reflected innovation and
technological change and innovation with respect to service
providers and the equipment, method, and means by which the
service is provided.
The ATU has supported every major change in modernizing the
industry, in changing the equipment, and advancing from more
modern buses to bus rail. We have supported expansion of
paratransit services and supported the implementation of
improved devices and safety mechanisms to ensure the better
transport of our communities' passengers. Transit labor has
taken the lead in each and every one of these areas for more
than 100 years, and I think what has been sought and what was
sought many years ago under 13(c) was to make sure that the
employees that were providing that service had their jobs
protected and their collective bargaining rights maintained as
part of Federal policy.
Senator Allard. Even at the risk of undoing a local
agreement?
Mr. Molofsky. I do not believe the history even reflects
that.
Senator Allard. I see, Okay.
Senator Reed. Mr. Chairman.
Senator Allard. Let me have Ms. Wilcox, Mr. Pantuso, Mr.
Rosenberg respond, and then I will call on you.
Senator Reed. If I may make one comment? The General
Accounting Office has studied this issue, releasing a report
which finds that most transit agencies report impacts are
minimal. I would suggest that we get a copy of the report for
the record and include it in the record.
Senator Allard. Without objection.
Mr. Rosenberg, Mr. Pantuso, Ms. Wilcox, do any of you have
any comments in this regard?
Mr. Rosenberg. I think as you said, Mr. Chairman, you do
not want to turn it into a 13(c) hearing, but I will say that I
think where general managers are looking for reasons to create
barriers, 13(c) is commonly the excuse that is provided in
order to prevent the opportunity for contracting. It has been
used as a barrier. The fact that it is reviewed by DOL does
seem inappropriate considering that it is a transportation
issue, and I am not aware of other situations where that does
occur, so again, I would say that it has been a barrier.
Whether perceived or actual, it certainly is a barrier and has
been used in many cases. Pensacola is one example. We have
heard many operators say and general managers say, well, the
reason we do not contract or we do not consider it is because
of the 13(c) issues and implications.
I am also not aware where a contract has been transferred,
either between contractors or between public agencies, where
there has been any significant loss of jobs. It is generally,
if you look at Foothill Transit in Los Angeles County,
California, or the fact that MTA took and contracted some lines
some years ago, the employment, what happened is people are
given jobs, and jobs are retained through attrition. Jobs are
not lost. New jobs are actually created by the private sector
and new people are employed in the transit industry.
Senator Allard. Mr. Pantuso, did you have any comments?
Mr. Pantuso. No, Senator.
Senator Allard. Ms. Wilcox, any further comments?
Ms. Wilcox. I do personally believe that it is an
impediment. I do own a business. It has been an impediment to
me personally. On the other side of the protection issues, 6
years severance pay, if I happen to lose a contract, I cannot
even calculate that type of arrangement. I do not know of
anybody else in the United States that has a 6-year severance
package. So to say that that is not an impact or it does not
keep small operators like myself from even bidding on a
contract such as that, I think that is not a correct statement.
Mr. Molofsky. I would note that the TRB report alluded to
earlier, when general managers were asked about why they may
choose not to contract, referenced an absence of control,
questions about cost savings, the lack of qualified firms, and
some difficulties with service, safety, and maintenance issues.
13(c) was a distant seventh or eighth, and I believe the report
reflected the expert views of a dozen or more individuals
selected through a Congressionally mandated study, and I think
it speaks for itself.
Senator Allard. Mr. Molofsky, would you agree though that
the provisions in 13(c) as stated by Ms. Wilcox, mean that
transit workers must receive 6 years of severance pay if they
are laid off? Would you agree that that provision is in there?
Mr. Molofsky. The purpose of 13(c)----
Senator Allard. No, no. Just answer the question, is it in
there? Is that a provision?
Mr. Molofsky. Yes. I will say to you though that----
Senator Allard. I know there are arguments for it, but I
just wanted to make sure----
Mr. Molofsky. No, no, no, no. The facts will show that the
existence of that provision along with the other guarantees
that Congress has agreed to for over 40 years, has served to
impact the way service is designed to make sure that the
employees' rights and interests are not jeopardized and that
jobs are maintained, either through attrition or other
restructuring and education. It has been very rare--the amount
of payments that have been distributed under the 13(c) program
pales--it is less than 1 percent of the total transit dollars
that have ever flowed from the program since it started, and to
rely on that as an argument, I think again reflects an
exaggerated view of the facts.
Senator Allard. I have one final question and then I'll see
if you have, Senator Reed, any questions.
At a recent hearing by the full Committee, we heard a
comparison between San Diego and San Jose, that suggested that
introducing competition to local planning can make major
strides to
improve both efficiency and effectiveness of transit. Since San
Diego seems to have been able to produce these improvements
under the current Federal law, it would appear that other areas
could do so as well. Are there any barriers in the current
Federal program which we could reduce or remove to make it more
likely that other areas would adopt San Diego's successful
practices? What local barriers might exist that should be
eliminated?
Mr. Rosenberg. Mr. Chairman, if you assume, if I understand
your question correctly, you are asking if any barriers
currently exist that prevent them from doing it. I suppose that
again, those barriers we have talked about, 13(c), the lack of
a guidance, the lack of enforcement of the check-off in
triennial reviews, I think those provide for a disincentive to
San Jose to do the right thing and ensure that service is
protected for their riders. I mean San Diego is considered one
of the most efficient operations in the country, and as I think
you pointed out, almost 50 percent of that service is
contracted. Laidlaw operates a significant portion of that
service in San Diego. We are quite proud of being a partner
with San Diego, the MTDB down there, Metropolitan
Transportation Development Board, in delivering quality service
and being part of one of the most efficient transportation
services in the country, constantly recognized by APTA and its
peers. So, I would say that what we are looking to you again
for, as we discussed, some of those barriers need to be
eliminated. The repeal of 5305(e)(3), a guidance, the direction
to FTA to provide a guidance so that they will be encouraged,
and provide incentives. Show San Jose, not only are we asking
you to look at contracting as an option, but if you are also
more efficient, we are going to help you with your problem. We
are going to give you dollars. There is going to be dollars
available to help you because you are also more efficient, to
help you deliver ridership, to help to meet your needs.
So by doing those things I think that you can accomplish
it.
Senator Allard. Senator Reed.
Senator Reed. I am fine, Mr. Chairman.
Senator Allard. Finished?
Senator Reed. Yes, sir
Senator Allard. Okay. We will keep the record open for 10
days for Members to submit questions. We would appreciate it
very much if you would respond to questions that are passed on
to members of this panel in a prompt manner back to the
Committee.
The Committee has heard a number of good issues today, and
we plan to follow up on all of the comments that were made. We
appreciate you taking the time to be here. It is not always
easy to get away from your job and your businesses to be here,
and we do appreciate it.
Thank you very much. The hearing is adjourned.
[Whereupon, at 4:11 p.m., the hearing was adjourned.]
[Prepared statements and additional material supplied for
the record follows:]
PREPARED STATEMENT OF SENATOR JON S. CORZINE
Mr. Chairman, thank you for calling this hearing. I welcome the
witnesses and look forward to their testimony.
I appreciate the role that the private sector can play in providing
public transportation. Private transit operators very often fill a
valuable gap in our transportation infrastructure by increasing
transportation opportunities during rush hours and providing greater
transportation alternatives to low-income workers as well as the
handicapped. In my own State of New Jersey, for example, we have a
number of bus and coach companies that supplement New Jersey Transit
efforts to provide sufficient transportation to work centers in New
York and Philadelphia.
However, I am concerned about efforts in the Administration's
reauthorization proposal, SAFETEA, that would mandate private
enterprise participation. These provisions would, among other things,
allow the Department of Transportation to withhold certification if a
Metropolitan Planning Organization (MPO) does not sufficiently allow
private operators to compete. Such a measure would interfere with the
countless decisions that departments of transportation and MPO's make
regarding how transit service should be provided.
In addition, Mr. Chairman, for many States such a measure would not
be needed. In my own State of New Jersey, New Jersey Transit has worked
out a suitable arrangement with private bus and coach companies: It
does not compete with those companies for any route, the route always
goes to the private company. This arrangement was worked out without
any Government intervention.
I hope, Mr. Chairman, that the reauthorization of TEA-21 will allow
the Federal Government to remain neutral on the issue of which type of
transportation provider is appropriate for communities. I also hope
that Congress will be able to get to work and produce a reauthorization
bill before the current law expires on September 30. Our States face a
severe transportation funding crisis if this does not happen.
----------
PREPARED STATEMENT OF IRWIN ROSENBERG
President, American Transit Services Council
Vice President of Government Relations
Laidlaw Transit Services, Inc.
July 23, 2003
Mr. Chairman, Mr. Ranking Member and honorable Members of the
Subcommittee, thank you for allowing me the honor to testify before you
today on behalf of The American Transit Service Council. I am Irwin
Rosenberg, President of the American Transit Service Council, and Vice
President of Governmental Relations for Laidlaw Transit Services, Inc.
one of the Nation's largest providers of contracted transit services.
ATSC members provide contracted services in hundreds of America's
rural, urban, and suburban communities in virtually every State
represented by the distinguished Senators of this Subcommittee.
Although the competitive contracting market has grown over the past
two decades, primarily during 1984-1993, it is increasingly evident
there continues to be attitudinal and policy barriers toward the broad
use of competitive contracting to provide public transportation
services in the most cost effective and efficient means possible.
According to the Transportation Research Board 2001 report
``Contracting for Bus and Demand Responsive Transit Services'', 40
percent of all Federal aid transit recipients contract for no services.
Competitive contracting can be a very effective tool allowing public
transit agencies to be more responsive to its customers, implement
effective controls on cost, and most important, improve and assure
quality service through establishing enforceable performance standards.
The advantages of competitive contracting include:
<bullet> The shift of risk.
<bullet> Reduced cost and cost control.
<bullet> Increased flexibility and responsiveness.
<bullet> Financing of capital investment by the private sector allowing
the maximizing of limited funds.
<bullet> Ability to manage service quality and reward good performance
as well as establish financial and equitable penalties for poor
performance.
<bullet> Creates a competitive labor environment allowing the private
and public sectors to negotiate improved work rules and appropriate
but fair wages and benefits.
<bullet> Allows public sector resources to be appropriately focused on
planning and policy development for systems.
Opponents historically attempt to confuse the issue by suggesting
what we are
advocating here is full privatization of public transit services. This
is not the case. We are here to ask you to support legislative language
within legislation reauthorizing TEA-21 (SAFETEA) that encourages the
inclusion of the private sector to the maximum extent feasible, rewards
efficiency and increased ridership, assures accountability for the
expenditures for limited public resources, and provides for the fair
and uniform application of Federal procurement guidelines. Competitive
contracting for service based on competition does not eliminate the
responsibility of transit agencies to determine policy, plan service,
or assure it is delivered in an efficient and cost effective manner.
When services are contracted, public agencies continue to set the
standards, hold contractors accountable, retain overall financial
responsibility and accountability for public funds, and establish the
true cost for delivering service.
Competitive contracting does not mean nonunion. Many of our
thousands of employees working for ATSC's member companies in
operations across America are represented by collective bargaining
agreements between our member companies and The Teamsters, the
Amalgamated Transportation Union, The Transportation and Communication
Workers, The Service Employees International Union, and many other
unions. It has been clearly demonstrated and proven competitive
contracting is not an attempt to avoid the collective bargaining
process nor is it an attempt to save money by simply lowering wages and
benefits.
ATSC members and many private companies across America are able to
provide essential capital and extend to their customers the value of
their resources and in depth experience along with national purchasing
relationships and innovations to deliver service more cost effectively
and efficiently.
From 1984 until 1993, The Congress and Administration initiated and
supported growth in competitive contracting through legislation and
Federal policy that encouraged the use of the private sector to the
maximum extent feasible and required local participation in the
planning process, for example early and constant consultation with the
private sector by the metropolitan planning organizations. In addition,
the FTA took a leadership role in sponsoring and supporting private/
public sector initiatives, publications, and symposiums bringing
together the private sector and public sectors in an effort to break
down barriers and break through ideological differences thus assuring
new private/public sector partnerships were created and successfully
implemented. Included with my written testimony are several success
stories of services contracted across the country, some in communities
of States you represent that demonstrate competitive contracting for
service works!*
---------------------------------------------------------------------------
* Held in Committee files.
---------------------------------------------------------------------------
Unfortunately, in 1993, with the change of Administrations, the
rules were changed and the early consultation and the inclusion of the
private sector to the maximum extent feasible no longer was required.
Some may suggest that the competitive market grew after 1993, which
to some extent is true. Unfortunately, it grew in great part due to the
passage of the American with Disabilities Act and the implementation of
the requirement to provide complimentary ADA service between 1992 and
1995 and some strong economic forces during the late 1990's as well as
growth in demand for ADA services. Many public transit agencies chose
to contract for paratransit services due the numerous variables and the
complexities of providing these services and the lack of financial
resources and experience to provide these ADA mandated services. Today,
according to FTA statistics (as reported in 2000 through the National
Transit Database) contracted paratransit services represent 70.8
percent of operating expenses while competitively contracted fixed-
route bus (motor bus) service is only 9.8 percent of the U.S. operating
expenses. If it is good enough for our Nation's frail elderly and
disabled population, isn't it good enough for the riding public? We
look to you to change this and to assure opportunities are enhanced
allowing greater participation by the private sector in the delivery of
service through competitive contracts.
Today, I have come before you on behalf of ATSC and those who are
dependent on transit across America to encourage you to consider our
recommendations for
enhancing the private sector's participation while you deliberate on
the reauthorization of TEA-21 (SAFETEA). I respectfully encourage you
to reestablish those policies that require the inclusion of the private
sector to the maximum extent feasible, require FTA to certify
compliance, establish tougher and enforceable regulations to prohibit
violation of the charter bus regulations and competition by the public
sector using publicly funded capital assets, and establish incentive
funding available to agencies that not only show increased ridership
but who must also show efficiency in delivering such service. Included
with my submitted testimony, I have provided proposed language for
inclusion in TEA-21 (SAFETEA) reauthorization legislation that can
accomplish the enhancements suggested within this testimony.
Thank you for the honor of appearing before you today.
<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
PREPARED STATEMENT OF ROBERT MOLOFSKY
General Counsel
Amalgamated Transit Union
July 23, 2003
Mr. Chairman and Members of the Subcommittee, thank you for the
opportunity to testify today on behalf of the Amalgamated Transit Union
(ATU), the largest labor organization representing public
transportation, paratransit, over-the-road, and school bus workers in
the United States and Canada, with nearly 180,000 members in over 270
locals throughout 46 States and nine provinces.
My name is Robert Molofsky. I have been General Counsel for the ATU
since 1996. Prior to becoming General Counsel, I served as ATU's
Legislative and Political Director for 15 years. Throughout the past
two decades, I have participated in transit privatization cost studies,
policy forums, and legislative campaigns, including
initiatives in Arizona, British Columbia, California, Colorado,
Maryland, Massachusetts, New Jersey, Rhode Island, and Toronto, among
others. In each case, our primary efforts have focused on promoting
unbiased decisionmaking in order to avoid artificially imposed cost
models and antilabor motivations. Moreover, we have sought to guard
against job losses and ensure the delivery of safe and efficient
transportation services consistent with local policies and agreements.
With this background, I am pleased to offer our views on the role of
the private sector in the public transportation industry.
For years, ATU and all transportation labor have endorsed the long-
standing Congressional policy that decisions involving the choice
between public and private transit operators should be left to local
authorities who are better equipped to make local transportation
decisions. The Federal Government is clearly best suited to making
broad public policy decisions rather than micromanaging the local
transit choices selected to meet the needs of rural, urban, and
suburban communities. We firmly believe that the public versus private
question should be decided on the basis of local needs, not ideology.
The Federal Government should remain neutral, and it should not intrude
on local decisionmaking.
In the past, much has been made of the statutory references to
involving the private sector to the ``maximum extent feasible'' when
designing local and regional transit systems. Yet, Congressional intent
dating back to the very first highway/transit legislation in 1964
indicates that the private enterprise participation sections of the
surface transportation law, now codified under TEA-21, were designed to
protect only then-existing private providers rather than any future
private sector operations.
ATU's Position
ATU has never been opposed to the provision of transit services by
private operators, so long as the methodology and criteria for service
selection and final decisions are left to local decisionmakers,
consistent with applicable laws, collective bargaining agreements, and
other pertinent agreements. Without question, the participation of
private enterprise in the Nation's transit sector is essential to the
health and success of the industry. And, we recognize today the
emerging role played by taxi and small van operations in providing
paratransit service, especially to meet the transit needs of our
seniors, rural residents, and those on Medicare. America's
transportation needs cannot be met by one mode alone, and they
certainly cannot be met by only one sector of such mode. In fact, ATU
represents thousands of transit workers in the United States throughout
the public and private sectors.
For purposes of our discussion, it is important to define the term
``privatization.'' In the area of public transportation, the term has
been used to refer to various projects, including those that provide
for ``competitive bidding,'' ``tendering,'' or ``subcontracting'' of
existing, new, or restructured transit service. The role of the private
sector in these situations may involve entire operations or portions
thereof. Similarly, the discussion of privatization can raise different
issues depending on whether such plans involve fixed-route bus service,
ADA paratransit or other specialized service, or light and heavy rail
service. The most controversial aspect of these options of course
involves the contracting-out of sections of route segments or portions
of existing systems, and denying those operations the opportunity to
address new or emerging transit needs.
With respect to transit labor, two common elements are threaded
through all the variations discussed above. First, we always strive to
protect the jobs of our members. Second, we seek to ensure that any
potential cost savings are properly measured and weighed against
potential adverse effects on safety and service.
It has been our experience that mandated privatization of public
transit through competitive bidding serves to reduce the standard of
living for workers and diminish the transportation service provided to
communities. Moreover, as discussed below, transit privatization is
based on questionable and at times false assumptions regarding
competition, cost, and the mechanisms used to calculate these and other
matters.
A Brief History
Between 1964 and 1984, UMTA (FTA) provided no separate guidance
relating to the participation of private enterprise in public
transportation. FTA first issued guidance on this issue in a 1984
policy statement, ``Private Enterprise Participation in the (Federal
Transit) Program,'' which set forth the factors FTA would consider in
determining whether a recipient's planning process appropriately
considered the participation of private enterprise. These factors
included consultation with private providers in the local planning
process, consideration of private enterprise in the development of the
mass transit program, the existence of records documenting the
participatory nature of the local planning process, and the rationale
used in determining whether or not to contract with private operators
for transit services.
In 1986, FTA expanded its private enterprise guidance for
recipients under the current 5307, 5309, 5310, and 5311 Programs in two
separate circulars which outlined certain elements and procedures
relating to private enterprise participation that grantees were to use
in their planning process. These guidelines were relied upon by the FTA
to intrude on the local decisionmaking process over the objections of
metropolitan planning organizations (MPO's), transit agencies, and
other community-based groups.
During the 1980's, ATU, along with expert transit industry
economists, including the nationally known KPMG Peat Marwick accounting
firm, and the Economic
Policy Institute severely criticized FTA's requirements which obligated
transit grant recipients to utilize the so-called ``fully allocated
cost'' methodology when evaluating the cost differential between public
agency costs and private sector bids for service competitively bid. The
experts agreed that such decisions should be made by comparing the
private company's bids against a public agency's ``incremental'' or
``marginal'' costs, without requiring public bids to include costs that
would not disappear with the contracted service. The exaggerated
results and misleading benefits generated by the fully allocated cost
methodology was a principal reason cited by FTA in rescinding the
privatization guidelines in 1994.
In carrying out the policies of the 1980's, FTA all too often
interfered with the local decisionmaking process affecting private
sector participation. The Agency used the transit grant program to
override State/local laws and referenda, rulings of State regulatory
bodies, and local collective bargaining agreements that covered
important worker issues such as prevailing and living wage
requirements, health care matters, contracting-out, and hiring rights.
For example, in 1989, FTA required Sonoma County Transit in Santa
Rosa, California, to reconsider the locally determined decision to
retain the unionized Golden Gate Bridge highway and transportation
district for certain fixed-route transit services rather than contract
with another nonunion private operator which had in fact submitted a
higher bid for the service. FTA served as an appeals bureau forcing the
recipients to alter a locally determined decision reached in its best
interest. Similarly, in 1990, Community Transit in Lynnwood,
Washington, was compelled to enter into an agreement with FTA
guaranteeing that buses purchased pursuant to a Section 5309 grant
would only be used by a private operator under contract to Community
Transit. The issue arose after Community Transit sought to bring the
service in-house and utilize the buses in question. FTA subsequently
refused their request to bring the service in-house, relying on the
initial agreement which FTA unnecessarily mandated in the first place
requiring that buses purchased under the contract be used only by
private operators in the area.
Moreover, in correspondence to members of the St. Louis, Missouri
area Congressional delegation, FTA indicated that future transit grant
funding was jeopardized because of a locally established ordinance
requiring prevailing wage standards for private operators bidding to
perform existing public transit services. Rhode Island had a similar
State law and could have been adversely affected by the policy as well.
Earlier, FTA delayed funding to Phoenix, Arizona, because the Federal
Agency disapproved a locally negotiated preference in hiring provision
concerning the transfer of service from one private operator to
another. These are only selected examples.
In an effort to restrain the Agency and ensure the return to the
Federal policy of neutrality on these issues, Congress in ISTEA
included the language currently codified at 49 U.S.C. 5305(e), which
states:
Sec. 5305. Transportation management areas
(e) Certification.--(1) At least once every 3 years, the
Secretary shall ensure and certify that each metropolitan
planning organization in each transportation management area is
carrying out its responsibilities under applicable laws of the
United States. The Secretary may make the certification only if
the organization is complying with Section 134 of Title 23 and
other applicable requirements of laws of the United States and
the organization and chief executive officer have approved a
transportation improvement program for the area.
(3) The Secretary may not withhold certification based on the
policies and criteria a metropolitan planning organization or
mass transportation grant recipient establishes under Section
5306(a) of this Title for deciding the feasibility of private
enterprise participation.
This provision was designed to ensure control by State and local
governments, their MPO's, and transit grant recipients in developing
and implementing competitive bid standards and conditions utilized for
considering private sector participation in public transit services.
The measure was a response to serious concerns that FTA was interfering
with locally established decisions affecting such matters.
As part of a compromise, ISTEA (and later TEA-21) retained the
``private enterprise participation'' requirements currently codified at
49 U.S.C. 5306, which state that metropolitan plans or transportation
improvement programs must encourage, to the maximum extent feasible,
the participation of private enterprise. This compromise has worked
well for all parties involved. It has allowed for the continuation of
private sector involvement in public transit services. In fact, during
the past 12 years, the percentage of contracted transit service in the
United States (approximately 25 percent) has remained at pre-ISTEA
levels. Yet, since 1991, the question of whether or not to utilize the
private sector in the provision of such transit services has
appropriately been a local decision. The Federal Government has
remained neutral on the issue of which type of transportation provider
is suitable for local communities.
The above-mentioned provision also led to FTA's 1994 Notice of
Recission of Private Enterprise Participation Guidance, which was
praised by the majority of transit systems that prepared comments in
response to the Agency's proposed recission.
Yet, despite the success of Federal neutrality with regard to
privatization under ISTEA and TEA-21, SAFETEA proposes to repeal
Section 5305(e)(3). It would once again permit DOT to withhold Federal
funds based on the policies and criteria established by MPO's in
determining the feasibility of private enterprise participation in
accordance with Section 5306, thereby mandating private enterprise
participation in statewide and metropolitan planning.
ATU believes that it would be a giant step backward to end the
long-standing Federal policy of neutrality with regard to local
decisionmaking and transit grant recipients' choice of public or
private transit providers, and the policies employed for their
implementation.
False Promises
As noted in a report by expert economist Elliott D. Sclar,
Professor of Urban Planning at Columbia University,\1\ privatization
establishes the wrong priority for urban transportation systems. The
primary goal of urban transportation policy should be to improve the
speed, safety, and convenience of metropolitan travel. The primary goal
of privatization is to reduce the tax money that publicly operated
systems receive to transport transit-dependent people, regardless of
the effect on congestion, pollution, and the economic efficiency of the
city. Thus, privatization is a significant break with past bipartisan
Federal policy that viewed urban public transportation expenditures as
investments in the Nation's productive capacity.
---------------------------------------------------------------------------
\1\ The Emperor's New Clothes: Transit Privatization and Public
Policy, Elliot D. Sclar, K.H. Schaeffer, and Robert Brandwein, for the
Economic Policy Institute.
---------------------------------------------------------------------------
Moreover, privatization confuses the efficiency and effectiveness
of transportation systems with lowering cost on individual routes. In
fact, the measure of the success or failure of urban transportation
lies in its ability to move travelers between any two points in a
metropolitan area, not just between two points on a given route. One
result is that privatization advocates typically omit from their
competitive cost analysis the necessary cost of increased supervision
and coordination which a privat-
ized, route-focused approach requires.
The FTA's policies of the 1980's failed because they sought to
impose privatization requirements on local government in an intrusive
manner with the required use of the discredited ``fully allocated
cost'' methodology. This accounting system grossly exaggerates
potential savings which have yet to be realized. Moreover, the
underlying premise of transit privatization schemes--that private
companies can reduce the cost of service delivery and provide a chance
for locally owned transportation companies to find business--has been
proven unfounded in an industry in which little competition exists.
The hope for savings from privatization rests upon an inaccurate
conception of how public contracting operates in practice. It is
important to avoid simplistic textbook theories of competitive markets
which do not take into account the real-world market strategies of
public contracting in which establishing monopolies, influencing public
officials, and obtaining hidden subsidies are commonly used to enrich
private investors at public expense.
The Denver Experience
Nowhere in America has transit privatization failed to deliver on
lofty promises more than in Denver, Colorado, where in 1988--in
response to pressure from the FTA--the State Legislature passed a bill
mandating that 20 percent of the bus routes operated by the Regional
Transportation District (RTD) be put out for competitive bid. In 1987
and 1988 when the privatization effort was making its way through the
Legislature, the 40 percent figure was continually bandied about in
relation to cost savings to convince lawmakers to vote for passage of
the privatization bill.
However, when the State auditor reviewed the cost issue in 1995,
the findings were startling. There was virtually no difference between
public and private operating costs. The differences ranged from a high
of 4 percent down to a low of seven-tenths of 1 percent, depending upon
route packages. In fact, between 1989-1995, the costs of contracted
service rose at a rate approximately double that of the rest of the
system,\2\ costing the city $9 million more than it would have paid if
the RTD had continued operating the service.
---------------------------------------------------------------------------
\2\ Paying More, Getting Less. The Denver Experience with Bus
Privatization, 1990-1995, by Elliott Sclar, Ph.D.
---------------------------------------------------------------------------
Since the mid-1990's, the situation in Denver has deteriorated even
further. In 2000, lawmakers increased the required level of private
sector participation to 35 percent. Yet, in 2002, for the third time in
as many years, the RTD was forced to replace its major private
contractor, as Oak Brook, Illinois-based ATC/Vancom pleaded to be
released from a 5 year, $80 million deal to avoid financial penalties
after having trouble meeting the terms of the contract.\3\
---------------------------------------------------------------------------
\3\ Bus Stopped: The Wheels on the Bus Go Round and Round as RTD
Struggles to find a
Competent Contractor, by Jonathan Shikes. Denver Westword, January 31,
2002. (See Attach-
ment A).
---------------------------------------------------------------------------
ATC was hired in 2000 to run two-thirds of RTD's privatized routes.
It replaced Knoxville, Tennessee's TCT Transit Service, which had been
fired the previous fall after only 3 months on the job. TCT had left
passengers stranded and failed to meet RTD's service requirements,
disrupting bus service and forcing ATU drivers employed directly by RTD
to pick up the slack by working overtime. In fact, TCT missed so many
runs that RTD forced ATU members to cancel their days off. Many ATU
members worked for 6 or 7 weeks straight without a day off.
Since 1989, no Colorado companies have bid on any of RTD's routes,
and finding companies that are both willing and able to carry the load
has been an insurmountable challenge for RTD.
Private Sector Opportunities Exist; Impediments Do Not
TEA-21 and FTA current practice already empower local communities
to carry out Section 5306 of Title 49, which, as indicated above,
states that metropolitan plans or transportation improvement programs
must encourage, to the maximum extent feasible, the participation of
private enterprise:
<bullet> Local officials have the authority to determine if, when, and
how routes are evaluated;
<bullet> Local officials have the authority to determine what factors
they use in determining whether to use private or public transit
providers. Federal policy permits locals to determine the extent to
which costs are considered and whether they want to use the fully
allocated cost methodology or another cost approach;
<bullet> Local officials, in determining overall local process, may
determine if a dispute process is appropriate, and, if so, what
that process will be;
<bullet> Local officials, at their option, may take into consideration
local situations that may affect decisions on transit providers;
<bullet> FTA reviews the local process as part of Triennial Review and
verifies that the local process is being observed;
<bullet> FTA certifies the local planning process, which must follow
Section 5306.
In addition, under SAFETEA, for the first time, private operators
would be eligible as ``sub-recipients'' of Federal formula funds under
Sections 5307, 5311, Job Access and Reverse Commute Program, and the
proposed New Freedom Program. As direct sub-recipients, they would be
permitted to do more than simply compete for contracts with a public
transit provider; they would be eligible to receive grants for the
provision of public transportation services that they define and
deliver.
Section 13(c) Employee Protective Arrangements Not a Factor in
Decisions to Contract-Out
Historically, one of the major issues raised by Section 13(c)
critics has been that it impairs the ability of transit agencies to
contract-out for transit services. However, transit officials in a
recent GAO report\4\ indicated that Section 13(c) does not directly
limit an agency's actual ability to contract-out, a claim supported by
another recent report, Contracting for Bus and Demand-Responsive
Transit Services: A Survey of U.S. Practice and Experience, published
in 2001 by the Transportation Research Board (TRB), and sponsored by
the FTA, as directed by TEA-21. These
reports dispel the myths about 13(c) and clearly substantiate the ATU's
long-standing position that the provision does not unduly restrict the
ability of transit providers to contract-out.
---------------------------------------------------------------------------
\4\ Transit Labor Arrangements: Most Transit Agencies Report
Impacts Are Minimal, GAO-02-78, November, 2001.
---------------------------------------------------------------------------
The TRB report correctly notes that, in fact, hundreds of U.S.
transit systems, of all sizes and types, now contract for some transit
services, and approximately one-third of the agencies contract-out more
than 25 percent of their service. Most significantly, the report
indicates, neither the general managers that currently contract-out nor
those that do not, identified Section 13(c) as influencing their
decision.
In fact, when asked why they do not contract-out transit services,
70 of 87 transit systems surveyed said that Section 13(c) played ``No
Factor'' in the decision. Rather, the reasons most cited by transit
systems for not contracting included:
<bullet> ``Maintain control;''
<bullet> ``Not cost-effective;''
<bullet> ``No reason to change;''
<bullet> ``Lack of qualified firms.'' \5\
---------------------------------------------------------------------------
\5\ Contracting for Bus and Demand-Responsive Transit Services: A
Survey of U.S. Practice and Experience, TRB, 2001, Question 19, Table
D-17.
---------------------------------------------------------------------------
Service Suffers
The TRB report also dispelled the myth that private firms will
respond to competitive market pressures and provide much better service
at a lower cost. For those agencies that do contract-out their work,
the report found that privatizing transit services results in fewer,
rather than more bidders. Cost savings, moreover, were far slimmer than
projected--0-5 percent rather than 10-15 percent--and they decreased
over time. Also, nearly 40 percent of those transit properties that do
contract-out their services reported that service quality and customer
service are negatively impacted by privatizing services. Safety,
maintenance concerns, and high employee turnover all contributed to
this negative impact on service quality when services are privatized,
the report notes.
Recommendations
Rather than resorting to the failed policies of the 1980's,
Amalgamated Transit Union recommends the Subcommittee consider adding
language to the planning provisions in connection with the
diversification of MPO boards, requiring MPO's to appoint transit
workforce representatives, private operators, minority groups, transit
riders, bicycle and pedestrian advocates, businesses, and others with a
direct stake in the provision of public transportation services to sit
on such panels, with the right to vote. We also support requiring the
governors to appoint these representatives for statewide planning.
Under current law, private providers of transportation, along with
other interested parties, are given a ``reasonable opportunity to
comment'' on transportation plans, but like transit workforce
representatives, they are not afforded a seat on the board, and they
certainly have no voting rights. These constituency groups would, as
intended in the original process, bring a real world and informed
perspective to the MPO boards, with a genuine ability to be heard and
effect the decisionmaking process.
In a major policy reversal from the Federal role of neutrality
embodied in ISTEA and TEA-21, SAFETEA would allow private operators to
essentially write their own ticket. In fact, by repealing Section
5305(e)(3), injecting private operators into the goals and objectives
developed through the statewide and metropolitan planning process, and
making them eligible to directly receive grants as sub-recipients, FTA
is proposing that private operators be able to operate the very service
they plan!
This combination of factors would discriminate against all other
transit constituency groups by affording only private providers a
formal role in the planning process for specialized transportation
services to the exclusion of all other interest groups, including
environmentalists, seniors, transit workforce representatives, and
others. ATU strongly urges the Subcommittee to oppose these changes,
and we recommend that it encourage labor-management partnerships to
address these complicated privatization issues. We have empowered our
locals to meet with their managers and professionally review the real
cost issues, productivity measures, and service requirements to achieve
meaningful savings when necessary.
Of course, private sector involvement in transit remains a viable
option in many instances. However, such decisions should be made on a
case-by-case basis after a thorough analysis of the relative costs and
benefits involved. The bottom line is that Federally controlled
privatization, initiated in Washington, DC, and forced on local and
State governments, is not in the best interests of either the Nation's
commuters or its taxpayers.
Thank you for the opportunity to testify today. I would be pleased
to answer any questions at this time.
Attachment A
Copyright 2002 Denver Westword, LLC
Denver Westword (Colorado)
January 31, 2002 Thursday
SECTION: News/News
LENGTH: 789 words
HEADLINE: Bus Stopped:
The wheels on the bus go round and round as RTD struggles to find a
competent contractor.
BYLINE: By Jonathan Shikes
BODY: For the third time in as many years, the Regional
Transportation District will have to replace its major private
contractor, as Oak Brook, Illinois-based ATC/Vancom has begged out of a
5-year, $80.1 million deal.
The company, which is a division of British conglomerate National
Express Corporation, did not give a reason for its decision to abruptly
leave Denver, but RTD spokesman Scott Reed says he believes ATC wants
to consolidate its operations in light of the economic recession that
has enveloped the United States in the last year.
``They want to pull out, and we are happy to see them do it,'' adds
RTD board member Dick McLean. ``I think they were having trouble
meeting the terms of the contract, and if they cannot do the job, they
take a financial penalty. My guess is that they do not want to incur
that, and that they'd rather get out now.''
A woman who answered the phone at ATC's Denver office said acting
manager Rick Murray would have no comment on why ATC was leaving the
city. No one from the company's Illinois administrative offices,
including CEO Jim Long, returned phone calls from Westword.
ATC was hired in August 2000 to run two-thirds of RTD's privatized
routes. It replaced Knoxville, Tennessee's TCT Transit Service, which
had been fired the previous fall after only 3 months on the job. TCT
had left passengers stranded and failed to meet RTD's service
requirements, forcing unionized drivers employed by the district to
pick up the slack by working overtime. TCT said it hadn't been able to
hire enough drivers because of the tight labor market. When ATC took
over, company officials promised they wouldn't have the same problem.
But only a year later, the company asked to be relieved of half of
its routes, Reed says, which were bid out to another transportation
conglomerate, First Transit Inc. of Cincinnati. In December, ATC asked
to be released from the rest of its contract, and RTD is currently
negotiating with the company on how to accomplish that as soon as
possible without disrupting bus service again. It has also asked First
Transit to step in and take over the remainder of ATC's routes.
``We have had numerous service problems with ATC,'' Reed explains,
``so this is probably the best solution and will hopefully provide
better service to the riding public.'' He adds that the financial
arrangements with both companies won't be revealed until the
discussions are completed sometime in February.
In 1989, the Colorado Legislature passed a law requiring RTD to
privatize 20 percent of its routes. Two years ago, lawmakers upped that
number to 35 percent. The theory was that private companies would
reduce the cost of providing bus service and provide a chance for
locally owned transportation companies to find business.
But no Colorado companies have bid on any of RTD's routes, and
finding companies that are both willing and able to carry the load has
been a nightmare for the district. Laidlaw Inc., which is based in
Canada, had the job before TCT; it now provides service to about one-
third of RTD's privatized routes.
``The whole thing has been a sham since the start,'' says Bill
Jones, a lobbyist for the Amalgamated Transit Union, Local 1001, which
represents bus drivers employed directly by RTD. ``Privatization might
sound good for the taxpayer except for the crappy service we have
gotten. We have always said that the privatized buses should be painted
bright yellow, because we want people to know the difference between
them and us.''
While union drivers were able to bail RTD out of the situation with
TCT, Jones says the district will be out of luck next time. ``The first
part is that at the time, we were under 20 percent privatization. The
problem now is that with 35 percent contracted, RTD drivers cannot
possibly step in and take over--we do not have the manpower. The second
part is, we, the union, are not going to lift one finger to help. Last
time, with TCT, they missed so many runs that they forced our members
to cancel their vacations and they would not allow anyone to take days
off. We literally had people here who worked for 6 or 7 weeks straight
without a day off. It was just horrible.''
Whether First Transit will be any better than the previous
companies is anyone's guess, however. ``It is to the point where board
members do not want to have the private contractors supply the routes
in their districts because they get all the complaints,'' says RTD
board chairwoman Mary Blue. Blue, who could not remember the name of
the new company, doesn't know if RTD has looked into the finances of
First Transit any more carefully than it did those of ATC or TCT. ``I
think our staff does research to the extent that it is possible.''
----------
PREPARED STATEMENT OF PETER J. PANTUSO
President and Chief Executive Officer
American Bus Association
July 23, 2003
Introduction
Good afternoon, Mr. Chairman and Members of the Committee. My name
is Peter J. Pantuso, and I serve as President and Chief Executive
Officer of the American Bus Association. The ABA is the trade
organization of the private over-the-road bus industry, and composed of
3,400 organizations, approximately 800 of which are bus operators. ABA
members engage in all manners of transportation services across the
Nation. ABA members provide commuter service, intercity service,
travel, tour, and charter service, and shuttle service to and from our
Nation's airports.
The private bus operators provide scheduled service to 5,000
communities and to 774 million passengers each year. This is more
service to more locations and more people than the airlines and Amtrak
combined deliver. In fact, we transport more people in 2 weeks than
Amtrak does in 1 year. In many areas throughout the country, motorcoach
or intercity bus travel is the only form of public transportation
available to citizens, particularly in rural areas.
For example, a half dozen charter bus operators in Colorado provide
service to 20 States west of the Mississippi. A similar number of
operators based in Rhode Island provide service to all the States east
of that river. Academy Bus Lines provide commuter service throughout
New York, New Jersey, and Connecticut. Finally, New Hampshire's Concord
Trailways Bus Company and its affiliate, Dartmouth Coach, one of the
larger independent motorcoach carriers in New England, provide daily
intercity service to Boston and Logan Airport from 34 cities and towns
in Maine and New Hampshire. Thirty-one of these cities have no other
form of intercity public transportation.
ABA members provide these many motorcoach services with less
Federal subsidy, by far, than any other mode of transportation. At the
end of my testimony is a copy of a report by Nathan Associates, Inc.,
which details the Federal subsidies to passenger modes between 1960 and
2001. This report is dramatic evidence of the lack of subsidy given to
intercity bus transportation. We buy our own equipment, maintain our
own terminals, train our own employees, and still manage to maintain
our position as the safest mode of transportation.
On behalf of the 3,400 members of the ABA, I want to thank you very
much for this opportunity to appear before the Committee to address the
issue of enhancing private participation in providing public
transportation. As you might expect, the ABA and its members have very
specific ideas about how private participation can be enhanced.
Intercity Motorcoach Security Funding
Before turning to our recommendations that fall within the
Committee's jurisdiction, I want to raise the subject of intercity bus
security. Support for intercity bus security is a critical step in
strengthening the private sector's ability to provide public
transportation. Intercity bus companies need that support in order to
continue to provide their services, particularly in rural areas.
Fortunately, Congress has spoken on this issue, and in the last 2
years has appropriated $25 million for intercity bus security. The
problem is that the Transportation Security Administration (TSA) has
refused to spend this money. Instead, TSA has tried to get
Congressional approval to reprogram these funds to aviation security.
Congress has thus far refused TSA, but the Agency will still not
release these funds.
You will note our industry's frustration in light of the TSA's
spending billions on aviation security but refusal to spend the
relatively small amount Congress has appropriated specifically for
intercity bus security. Our members want to take proactive measures
that further protect the traveling public, such as increasing passenger
screening, installing driver shields, putting disabling switches on
buses, and improving emergency communications, but we need some help.
We do not have the capital both to acquire and maintain buses, garages,
and terminals and to fund these security programs. We welcome any help
this Committee can give in encouraging TSA to release the intercity bus
security funds.
That said, let me turn to ABA's recommendations for enhancing
private participation in providing transportation. Perhaps surprisingly
to those who are unfamiliar with the private bus industry, our ideas do
not come with pleas for ``set-asides,'' a radical restructuring of the
Federal Transit Administration (FTA), significant changes in the
Federal Transit Act, or even a huge ``price tag.'' Rather, what the ABA
advocates is several steps this Committee could take to help the
private bus operators continue to provide service to the American
traveling public at little or reduced cost to the taxpayers.
ADA Funding
First, ABA believes that additional funds are needed in one area.
That area is the provision in TEA-21 that sets up a competitive grant
program to place wheelchair lifts on motorcoaches. The program,
administered by the FTA, uses criteria such as the applicant's service
area, fleet size, and population served, to put these funds where they
will do the most good. But the program is underfunded. For this, the
last year of TEA-21, the fund provides $7.1 million for wheelchair
lifts. Since the Transportation Research Board (TRB) estimates the cost
of equipping a motorcoach with a wheelchair lift is approximately
$35,000, and the $7 million provides roughly enough money to equip 200
buses with wheelchair lifts. However, the Americans with Disabilities
Act (ADA) requires that by 2012 all of the Nation's private
motorcoaches in fixed-route service be wheelchair lift equipped and all
other motorcoach operators must provide a lift-equipped vehicle on 48
hours notice. The need for additional funds for this program is
obvious.
Moreover, the private motorcoach industry cannot afford to meet
this Federal mandate without Federal help. The average ABA member has
fewer than 10 motorcoaches and I know of no ABA member who could find
the $350,000 in their budgets to equip all of its coaches with
wheelchair lifts. Failure to meet the ADA mandate will require ABA
members to go out of business to the detriment of the traveling public
as well as to the detriment of the small business community, as a
majority of motorcoach companies in the Nation are small businesses. It
must be said that only the private operators face this dismal prospect.
The publicly funded transit agencies can get up to 90 percent of their
costs (equipment, facilities, etc.) paid for by the Federal Government.
ABA members, as I stated earlier, pay for their own equipment, training
their own personnel, build their own facilities. A fully funded
wheelchair lift accessibility fund is critical to the health of the
industry and the provision of transportation in this country.
Appended to my testimony is a recent letter from Congressman Jim
Langevin to Chairman Young and Ranking Member Oberstar of the House
Transportation and Infrastructure Committee. The letter speaks more
eloquently than I about the need for more funds for wheelchair lifts.
Congressman Langevin writes, ``Our Nation's bus owners and operators
wish to comply with the requirements of the ADA to guarantee access to
people with disabilities, and the Federal Government must be an active
partner in reaching this goal through appropriate funding of the
Wheelchair Lift Accessibility Fund.''
Intermodal Facilities Funding
Another way to enhance private participation in providing public
transportation is to provide a dedicated source of Federal funding to
create a network of intermodal passenger facilities that will provide
seamless intercity and local public transportation. The Nation's
surface public transportation system comprises four different modes--
motorcoaches, intercity rail, urban mass transit, and rural local
transit. To be truly effective alternatives to the private automobile,
these modes must be linked to each other and to airports at intermodal
transfer facilities that provide seamless transportation for the
traveling public. Today, there are perhaps 150 true intermodal
passenger terminals in the country, although few bring together all
modes.
Yet, there is a critical need for connections between local transit
and intercity services, and between rural transit and intercity bus
services, with through connections to intercity rail and air services
not available locally. Moreover, buses picking up charter or tour
groups arriving by airplane or rail need parking facilities at those
terminals. And people in suburban areas need park and ride facilities
for convenient access to public transportation.
It is true that under TEA-21, intermodal facilities are eligible
for funding under a variety of programs including Surface
Transportation Program (STP), Congestion Mitigation and Air Quality
Program (CMAQ), and the transit discretionary programs. However, very
few intermodal facilities have been funded under these programs. In our
view there are three reasons for this lack of intermodal facilities.
One, there is no dedicated funding stream for intermodal
facilities. Two, spending decisions at the State and local level are
not dependant on how a project relates to and enhances other
transportation modes. Three, these facilities do not enjoy a mode-
specific constituency like highway or transit improvements. Given these
three factors it is no surprise that intermodal facilities rarely
become a high enough planning priority to receive funding.
However, the need is there and for the reauthorization of TEA-21 a
solution is at hand. The Administration's reauthorization bill,
SAFETEA, contains a provision (Section 6002) to establish a Federal
fund dedicated exclusively to the development of intermodal passenger
transfer facilities and integrated public transportation
information systems. Funding would be used as seed money for a variety
of intermodal projects distributed throughout the country and would be
awarded on a competitive basis. Eligible projects are those that
connect intercity bus service and any other mode of public
transportation through intermodal facilities and integrated information
systems.
SAFETEA has $85 million for this new intermodal transportation
facilities fund. House bill H.R. 1394, The Intermodal Transportation
Act, contains the same provision and funds it at $100 million. ABA
certainly supports this provision but not only for the facilities
themselves. In addition to the prospect of new and needed facilities,
experience has shown that such facilities aid the economic development
of the entire area. Meridian, Mississippi, Minneapolis, Minnesota, and
Everett, Washington have each recently built such a facility, and one
of the benefits of the transfer facility at each location has been the
development of shops, stores, and services. In the case of Everett, a
community college has also located in the area near the facility. These
types of intermodal facilities are needed across the country to connect
the rural, urban and suburban populations. ABA asks that the Banking
Committee include this proposal in its TEA-21 reauthorization bill.
The lack of intermodal transportation facilities brings another
issue and problem for the bus industry into sharp focus. Intercity
buses are rarely included in the State or local planning process
required for Federal funding, and as a result, intercity buses and
those that rely on them rarely receive the Federal support that is
needed. Most intercity bus service is provided by the private sector
without subsidies. But with rising costs, much of that service,
especially rural service, has
disappeared, leaving many communities without intercity public
transportation. Because of the lack of intermodal passenger facilities,
intercity bus patrons are left without the means to make needed public
transportation connections. These are issues that should be addressed
by transportation planning. They frequently are not addressed.
Why this situation goes uncorrected is the product of several
factors. First, bus projects are typically small in scope and
therefore, are not on the ``radar screen,'' especially when private bus
operators and riders are often not involved in the planning process.
Second, States can currently divert designated rural intercity bus
funds to other causes by asserting that they face no ``unmet intercity
bus needs,'' without engaging in a planning process involving the
private bus operators and riders. Third, FTA policy restricts the use
of Section 5309 funds to use for only the ``transit'' and intercity
rail portions of intermodal facilities, barring the use of those funds
for the intercity bus portions of those facilities.
The result is that critical bus facilities and services do not get
funded. The solution is to first authorize FTA to withhold funds from
any metro planning organization or transit agency within its
jurisdiction that omitted private operators in the planning and
transportation improvement program. Second, the law should be clear
that inclusion of private operators in the planning program is intended
to preserve private services that already exist, as well as to involve
the private sector in new services. Third, the law should clarify that
Section 5309 intermodal funds may be used for the intercity bus
portions of intermodal facilities, as well as the transit and intercity
rail portions. And States should be required to use rural intercity bus
program funding for its intended purpose and should include private bus
operators in the planning process for that funding.
Rural Transportation
Another opportunity for this Committee to enhance private
participation in transportation services is to increase the funding for
the so-called 5311(f) program. Section 5311(f) provides funds for
private operators to provide rural transportation. The rural areas of
the country are most in need of additional transportation services.
Over the last 30 years, some 20,000 rural communities have lost bus
service. First, in ISTEA and then in TEA-21, the 5311(f) program has
been instrumental in reversing the decline in bus service to rural
communities. In this regard, the ABA and its members congratulates the
States of Pennsylvania and Colorado, which have been the leaders in the
effective use of 5311(f) funds to restore rural bus service. Rural bus
service not only provides essential passenger transportation, but also
its incidental package express service is the only form of daily,
scheduled freight service for many of these small towns. The program is
funded at slightly more than $30 million. It has proved its
effectiveness and its worth and should be reauthorized and funding to
it should be increased.
The program's effectiveness can be measured. Greyhound Lines, Inc.,
an ABA member, reports that in 2002, it received $4.7 million in
section 5311(f) operating funds. With these funds, Greyhound served 332
communities, which otherwise would not have service. That works out to
approximately $14,000 per community. In addition, the aforementioned
Nathan Study (pg. 9, fig. 9) represents the increase in the number of
cities which have had bus service restored since the mid-1990's, not
coincidentally the beginning of the 5211(f) program.
By comparison, the Essential Air Service program serves
approximately 125 communities with roughly $125 million in annual
subsidies, or approximately $1 million per community. Certainly, the
EAS program is providing a valuable public service, but in these tight
budget times, it will be very difficult to expand that program even
though many communities are clamoring to be tied into the Nation's
commercial aviation program.
We believe the answer to this problem is to supplement EAS with an
essential bus service program, which would be patterned after the
section 5311(f) program and funded at about the same level. Under this
program, States would contract with intercity bus operators to provide
surface transportation services from rural communities directly to
commercial airports. H.R. 1394, the Intermodal Transportation Act,
proposes such a program. We believe that this program could connect
many times the number of communities served by EAS to the national
aviation system.
Motorcoach Operations
Everyday motorcoaches bring people, as tourists, commuters, and
shoppers into the Nation's cities. And everyday these motorcoaches are
confronted with obstacles to their safe and efficient operations.
Obstacles put in place by public officials who do not seem to consider
the good that motorcoaches do. One area that is ripe for change and a
change necessary to allow the private bus operators to participate
fully in providing public transportation is to find adequate bus
parking. In most cities across the country, motorcoach operators face
limited options for parking vehicles used for charter, tour, and
commuter services. Also, operators are penalized for idling their buses
and must often circulate city streets while waiting for their groups.
This wastes fuel and contributes to traffic congestion and engine
emissions in urban centers.
Buses provide an important public benefit by providing an
alternative to private cars. These bus services reduce the level of
traffic congestion and the ills associated with it, including air
pollution and reduced productivity. Also tour and charter services
bring an economic boost to the local economy. By one study (a copy of
which is appended to the end of my testimony), one bus of tourists
staying overnight in a destination leaves as much as $11,000 in the
local economy. Inadequate bus parking reduces these benefits to the
local area and economy.
ABA also understands communities' efforts to curtail emissions; in
fact, buses are a part of any equation to solve the problem. However,
there is a problem where communities go too far and restrict bus
operations in the false hope that to do so would restrict harmful
emissions. Unreasonable idling rules and parking restrictions are just
as harmful. Buses need at least 10 minutes idling time to provide
sufficient braking power and air conditioning for the passengers'
comforts.
There is a solution to this problem. It has been under discussion
between the ABA and the American Public Transportation Association
(APTA is the association that represents publicly funded transit
agencies). The remedy is to allow the private bus operators to use the
terminal facilities of public transit agencies. Transit agencies
usually operate terminals with parking facilities and during their peak
daytime hours of operation, most of the transit buses are on the
streets, leaving the terminal facilities available for other uses.
The private motorcoach operators could use the transit agency's
parking facilities to park off of city streets and in a safe and
accessible facility thereby saving fuel and reducing traffic congestion
and engine emissions. This would also ease the need for local
governments to provide separate parking facilities for charter, tour,
and commuter motorcoaches. We have also suggested that Congress
consider a demonstration program for some of the most frequently
visited tourist destinations to develop solutions to the parking
challenges facing urban areas.
Another obstacle is any prohibition against buses using HOV lanes
when ``deadheading'' (that is, running empty) to its terminal after or
before a run. A motorcoach can take as many as 50 cars off a highway.
What better way to provide for the public than to facilitate on time,
frequent service than to allow buses to access these lanes? For the
same reasons, motorcoaches should be exempt from paying tolls while
engaging in transportation operations.
Public Funds vs. Private Operators
Another area that requires attention is the tendency of some
Federal, State, and community funded transportation services; transit
services which want to compete with private operators who have limited
funds. Simply stated, Federal funds should not be used to compete with
private bus operators where the private sector is willing and able to
provide service. Public funds would be better spent on necessary
services leaving the provision of most transportation to the private
sector. In addition to providing transit service, some public transit
agencies are beginning to ``link'' up with each other to provide
intercity bus service and even tour and sightseeing services.
No other transportation mode has to face this subsidized
competition. The Nation does not have a national airline and Amtrak was
formed only after it became abundantly clear that the privately owned
U.S. railroads could not profitably transport passengers. The private
motorcoach industry should likewise be free from competition by
government entities.
A recent example of this problem is found within the District of
Columbia where there is a plan to establish a bus ``circulator'' to
take tourists around the Washington monuments and sights. The plan, as
reported in The Washington Post, would cost $37 million the first year
and would be in direct competition with the three private tour bus
services currently operating within Washington. There is no reason for
such a service, and it certainly cuts against the notion that the
public sector should not be engaged in any service that is provided,
safely, and at reasonable cost, by the private sector.
A related problem is that of publicly funded transit agencies which
illegally provide charter services to the public in contravention of
the Federal Transit Administration charter rules. The rules provide
that private companies be given the first opportunity to provide
charter service and that only if a ``willing and able'' private
operator is not available, may a publicly funded transit agency, with
its Federally funded equipment and cost advantage, operate the charter.
However, ABA has catalogued many instances where the charter rules
are not followed. Either the public transit agency does not notify the
FTA, ABA, or local operators of the charter opportunity or it uses its
cost advantage to operate the charter below cost and below what the
private operator can charge.
Finally, with budgets tight and transit agencies seeking riders
some are exploring the idea of two agencies linking up at the edge of
each agency's service area to provide intercity bus service, in direct
competition to the network of private bus operators currently active.
ABA and APTA are in discussions to find ways to eliminate these
charter violations. The two organizations have discussed several ideas.
One idea of particular merit would entail realistic penalties for
violations of the transit competition rules. Currently, if a transit
agency is found to have violated the rules, FTA's only recourse is to
deprive that agency of its Federal funding--the entire agency's Federal
funding. As a practical matter, ABA believes that such a penalty will
never be imposed. As an alternative, the two organizations are
discussing the necessity of a graduated series of penalties, perhaps
the profit or cost of providing the charter or a percentage of the
agency's funding. To the ABA, this approach makes more sense and the
penalties have a greater chance of being imposed.
A second ABA goal is the clarification of the definitions of
``charter service,'' ``sightseeing'' and ``regular and continuing
service'' in connection with shuttle service to prevent confusion as to
which transportation provider can provide what service. Finally, in aid
of preventing the public sector from doing what the private sector does
best, ABA believes that the public transit agencies should not be
allowed to operate scheduled bus service beyond the urban area where it
provides regularly scheduled mass transportation services.
Finally, it goes without saying that the ABA opposes any attempt to
weaken the current charter regulations. Our major disagreement with the
Administration's SAFETEA bill is in the bill's Section 3020 which would
allow the Secretary of Transportation to eliminate the FTA charter
rules if a transit agency can say that it is providing service to the
elderly or the disabled. That is service the private sector provides
and provides well and represents at least 40 percent of our current
customer base. It bears repeating that public funds should not be used
when there is a vibrant private sector willing and able to do the job.
Conclusion
Mr. Chairman, Members of the Committee, the ABA and its members
have really one goal. That is to ensure that the private bus companies
are allowed the opportunity to compete for business on a level playing
field, allowing us to do what we do best: Provide the greatest number
of Americans with the widest array of transportation services at the
lowest cost with the least amount of Government subsidy.
Please note that all of the suggestions I outline in my testimony
carry a relatively small ``price tag,'' require no intrusion on other
modes of transportation and serve only to strengthen the Nation's
transportation system. The needs of the private bus industry are small,
but the payoff to the traveling public is great. The ABA and its 3,400
members and the 774 million people it serves each year hope that you
will agree with these suggestions and use them to enhance private
participation in providing transportation to the Nation. Thank you for
your consideration and I will be happy to answer any questions from the
Members of the Committee.
<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
PREPARED STATEMENT OF MARGIE WILCOX
Co-Chair of the Paratransit
and Contracting Steering Committee
Taxicab, Limousine, and Paratransit Association
July 23, 2003
Executive Summary
On behalf of our country's private taxicab, paratransit, and
contract service providers, we appreciate this opportunity to testify
on the benefits of reinvigorating private sector participation in the
provision of public transportation services funded by the Federal
Transit Administration.
Industry Overview
The Taxicab, Limousine, & Paratransit Association (TLPA), formed in
1917, is the National organization that represents the owners and
managers of taxicab, limousine, sedan, airport shuttle, paratransit,
and nonemergency medical fleets. TLPA has over 1,000 member companies
that operate 124,000 passenger vehicles. TLPA member companies
transport over 2 million passengers each day and more than 900 million
passengers annually.
The taxicab, limousine, and paratransit industry is an essential
part of public transportation that is vital to this country's commerce
and mobility, to the relief of traffic congestion, and to improving the
environment. The private taxicab, limousine, and paratransit industry
transports 2 billion passengers annually, compared to the 9 billion
passengers transported by public transit; provides half of all the
specialized paratransit services furnished to persons with
disabilities; serves as a feeder service to major transit stations and
airports; and provides about half of its service to transportation
disadvantaged people, such as the elderly, who are either not able to
drive or do not have a car.
TLPA Reauthorization Recommendations
TLPA urges the following legislative actions be included in the
Senate transportation reauthorization bill to advance the public policy
benefits that would be derived from a significant expansion of the role
private operators play in the delivery of public transportation
services.
Repeal Section 5305(e)(3), the Antiprivate Transportation Operator
Federal Transit Act Planning Provision
The President's Reauthorization bill (SAFETEA) included the repeal
of this provision (by rewriting the planning sections of the Federal
Transit Act and eliminating this provision), and TLPA strongly urges
the Senate to adopt this recommendation. The law and Congressional
intent mandate a role for the private sector in planning for public
transit services, yet at the same time, this section explicitly
prohibits enforcement of the law. This provision is responsible for
private transportation providers being pushed away from the transit-
planning table. We believe the best path to more efficient public
transportation is to have all the stakeholders such as local officials,
consumers, public transit operators, private transportation operators,
and labor be included in the planning process. We do not advocate
excluding anyone. We urge the Senate to support repeal of this section.
Require DOL and DOT to Amend Their Administration of the Federal
Transit Act Labor Protections to Make Them Less of an Obstacle
to the Efficient and Effective Provision of Public Transportation Services
There are four core actions that should be taken regarding transit
labor protections: (1) The carryover of the workforce issue needs to be
addressed by declaring that a change in contractors is not an event
that gives rise to Section 5333(b) protections; (2) similarly, it
should be made clear that there is not a required carryover of
workforce in ``public to private'' transitions where no employees are
dismissed as a result of a Federal project; (3) clarify that binding
interest arbitration is not a required provision under Section 5333(b);
and (4) limit the review of Federal Transit grants to be conducted by
the Federal Transit Administration, eliminating the current practice of
subjecting FTA grants to review not only by DOL, but by private
entities (the national offices of the relevant transit labor unions).
We believe the U.S. Department of Transportation is fully capable of
administering its grant program without outside assistance.
Direct FTA to Issue a Private Sector Participation Policy
There is ample, indisputable evidence that the Private Sector
Participation Guidance, developed and promoted by the Reagan and Bush
Administrations, was a great success, increasing competitive
contracting of public transit services from $10 million to $500 million
per year in the course of one decade. Since the Clinton
Administration rescinded this Private Sector Participation Guidance in
1994, consideration of the private sector has stagnated. Requiring the
FTA to conduct a rulemaking to reestablish private sector participation
guidance to implement the private sector provisions of the statute
would result in increasing the efficiency and effectiveness of public
transit operations to the benefit of all transit riders.
Include President Bush's New Freedom Initiative Program in the Senate
Reauthorization Bill and Include Language Making Private Operators
Eligible Subrecipients for the Program
The President's New Freedom program will provide greater mobility
for disabled persons. The program, which would be administered through
the FTA, would authorize funding to qualified organizations (community
groups or directly to taxicab companies) for use in enhancing local
transportation services for disabled persons by working with private
taxicab service providers to fund the purchase, promotion, and
operation of taxi-vans that meet Federal accessibility requirements.
The service would enhance the ability of disabled persons to reach
work, schools, and other places in the community.
Require that FTA's Special Needs Programs: Job Access and Reverse
Commute,
New Freedom, and Section 5310, Utilize the Same Planning and
Eligibility Guidelines and Definitions
Each one of these special needs programs has a slightly different
target audience, JARC is geared toward unemployed and welfare to work
individuals; New Freedom is intended for disabled individuals whose
needs cannot be met by Americans with Disabilities Act accessible
transportation options; and Section 5310 assists private nonprofit
groups and certain public bodies in meeting the transportation needs of
elders and persons with disabilities. However, there are such
similarities and potential synergies among the programs that TLPA urges
that the
Senate require that each program be required to have uniform planning
and eligibility requirements using the JARC planning and eligibility
requirements as the model of the uniform guidelines.
Require an MPO to Have an Eligible Private Transportation Operator be
Appointed as a Voting Member of the MPO if the Public Transit
Operator is a Voting Member
Under President Bush's fiscal year 2004 Federal Budget proposal and
the Administration's Reauthorization bill, the local transit planning
process will be greatly strengthened with more funding and with a clear
mandate to reach a local consensus on issues. Because the traveling
public benefits equally from using privately provided and publicly
provided mass transit services, private transit operators should have
an equal voice with public transit operators in planning and designing
local transit services. As stated above, we believe the very best path
to more efficient public transportation is to have all the stakeholders
be included in the planning process.
TLPA Legislative Initiatives
More detailed explanation for each of the TLPA legislative
initiatives listed in the Executive Summary follows.
Background of the Federal Transit Act and Its Private Sector
Participation Provisions
The Urban Mass Transit Act of 1964 was the Congressional response
to the dismal condition of the private sector transit industry in the
1960's. In the decade just prior to the enactment, 243 transit
companies were sold and another 194 were abandoned. These sales and
abandonments had a profound effect on transit labor and transit
services. Between 1945 and 1960, transit employment fell from 242,000
employees to 156,000 employees. Although mass transit had been
generally viewed as a local, rather than a national issue, many Members
in Congress viewed the Federal mass transportation program as a
necessary step to preserve both transit jobs and transit services. One
of the principal features of the 1964 Act was to provide Federal
funding for local public bodies to acquire financially troubled private
transit companies.
Private Enterprise Requirements in the Federal Transit Act
Since its inception, the Federal Transit Act has recognized the
importance of private sector participation in Federal Mass
Transportation program. Section 5323 (a)(1)(B) [formerly 3(e)], Section
5303 (e & f) [formerly 8(e)], Section 5304(d) [formerly 8(h)], Section
5306(a) [formerly 8(o)], and Section 5307(c) [formerly 9(f)] mandate
private sector participation in programs assisted by Federal transit
grants. (When discussing the Federal Transit Act, it is sometimes
confusing because one person may refer to Section 16(b)(2), Section
8(o), or Section 13(c), while another person may refer to Section
5310(d), Section 5306 (a), or Section 5333(b). Both people are
referring to the same provisions of the Act, but the citations are
different because in July 1994, after 30 years, Public Law 103-272
repealed the Federal Transit Act and related transit provisions and
reenacted them as Chapter 53 of Title 49, United Sates Code.)
Although the private enterprise participation requirements had been
the law for nearly two decades (1964-1984), contracting of services to
private operators was a minimal $10 million per year in the early
1980's. Then in 1984, in response to President Reagan's call for a
greater private sector role in addressing community needs, the Federal
Transit Administration issued the Private Enterprise Participation
(PEP) Policy that called for the use of private providers in
transportation wherever practical. The reason given for this policy was
that injecting competition into the provision of public transit
services would result in lower costs for quality services. It was also
thought that in addition to real cost savings, contracting-out some
services would limit the growth in transit agencies' own costs for
providing services.
Success of the PEP Policy is well documented. From 1984 through
1990, the amount of privately contracted transit bus service increased
by 62.5 percent. The amount of privately contracted paratransit service
increased by 135 percent from 1984 to 1991. The FTA Private Enterprise
Participation Policies helped encourage competition and has provided a
framework for the transit communities to meet the requirements in the
Federal Transit Act of 1964, as amended, that private transportation
companies are included, to the maximum extent feasible, in the planning
and delivery of transit services. The FTA private enterprise policy was
very successful in that competitive contracting reduced public costs in
three ways:
<bullet> Directly through lower service costs that typically ranged
from 20 percent to 40 percent.
<bullet> Indirectly though ``ripple effect'' impacts on services that
have not been competitively contracted. For example, San Diego
began contracting in 1979, and as a result of the PEP Policy has
converted 38 percent of its bus system to competitive contracting
at an average cost saving of 30 percent. ``Ripple effect'' savings
have reduced the costs of noncompetitive service by 25 percent per
vehicle hour. In fact, through 1996, as a result of competitive
contracting, San Diego system-wide bus costs per vehicle hour were
$475 million less than if costs had risen at the industry rates
experience by those agencies that do not contract.
<bullet> Private sector contractors pay local, State, and Federal taxes
and the taxes paid by private operators benefit the public good.
There are numerous examples in addition to San Diego Transit where
the impetus of the FTA PEP Policy resulted in innovative services
utilizing private operators. A few follow below.
<bullet> In Phoenix, AZ, the transit agency saved a significant amount
of money by eliminating Sunday bus service and replacing it with a
shared-ride taxi service.
<bullet> Ann Arbor Area Transit Authority eliminated its late night bus
service and replaced it with a shared-ride taxi service.
<bullet> Transit Authorities in Dallas and Houston expanded service to
growing suburban areas by contracting for express bus service.
<bullet> Denver Regional Transit District is required by State law to
contract-out 35 percent of its fixed-route service, which it does
at cost savings of 41 percent.
<bullet> Indianapolis contracts 70 percent of its bus system
experiencing a cost per hour reduction of 22 percent.
<bullet> The city of Las Vegas contracts-out its entire system. Costs
per vehicle hour dropped by 33.3 percent.
<bullet> Foothills Transit outside Los Angeles, contracts-out its
entire system to private operators. Its ridership has risen by over
50 percent, it has added 57 percent more service, and its fares
have dropped by 37 percent.
An often-quoted fallacy is that the savings to the transit agency
are because the contract workers are paid a lower wage that the public
transit employees. However, studies have shown that the lower
contractor costs result from administrative efficiencies, improved
management of the workforce, more productive work rules, better
utilization of equipment and facilities, improved maintenance
practices, and labor compensation consistent with competitive market
rates.
Rescission of the PEP Policy
In 1993, in the early days of the Clinton/Gore Administration, a
great deal of Administration governmental reform policy was based on a
book entitled ``Reinventing Government'' by David Osborne and Ted
Gaebler. The book specifically cited the FTA Private Enterprise program
for its efforts to achieve competition and efficiency in the delivery
of government services. In a letter protesting the rescinding of the
PEP Policy by the Clinton Administration, Osborne stated, ``I believe
the Private Enterprise Policy is indeed a model program. It simply
requires local authorities to determine and consider the alternatives,
public and private, in reaching transit
objectives.'' He continued, ``The injection of competition into public
monopolies is a fundamental principle not only of ``Reinventing
Government,'' but of the Administration's National Performance Review,
run by Vice President Al Gore. I serve as a
Senior Adviser on the Performance Review. We are actively trying to
increase, not decrease, the amount of competition in Federally funded
services.'' Osborne's words fell on deaf ears. The PEP Policy was
rescinded. Since the rescission of the PEP
Policy in 1994, there have been no significant incentives to continue
the more effective use of resources that result from the consideration
of competitive contracting in the provision of public transportation.
TLPA Legislative Program to Revitalize the Participation of Private
Transportation Providers to the Planning and Delivery of Public Transit Services
The infusion of competition into the provision of public transit
services is important for a number of reasons including: (1) the need
to guard against inequitable Government subsidized competition, (2) to
guarantee efficiency and effectiveness in the expenditure of Federal
mass transportation assistance through competition, and (3) to prevent
duplicative expenditures. The following five legislative initiatives
are designed to increase the participation of private operators to the
maximum extent feasible as is called for in the statute.
Repeal the Anti-Private Sector Federal Transit Planning Certification
Provision
The Planning Program provisions applicable to transit and
metropolitan planning agencies are found in Section 5303-5306 of Title
49 United States Code--Transportation. Section 5306(a) states: ``A plan
or program required by Section 5303, 5304, or 5305 of this Title shall
encourage to the maximum extent feasible the participation of private
enterprise.'' Under Section 5306(c), the private enterprise
participation requirements are defined as:
<bullet> Section 5306(c)(2) requires each recipient of a grant shall
develop, in consultation with interested parties, including private
transportation providers, a proposed program of projects or
activities to be financed;
<bullet> Section 5306(c)(3) requires each grant recipient to publish a
proposed program of projects in a way that affected citizens,
private transportation providers, and local elected officials, have
the opportunity to examine the proposed program and submit comments
on the proposed program and the performance of the recipient;
<bullet> Section 5306(c)(6) requires each grant recipient to consider
comments and views received especially those of private
transportation providers in preparing the final program of
projects.
Unfortunately, the experiences of private operators with transit
agencies and Metropolitan Planning Organizations (MPO's) for the past
12 years under ISTEA and TEA-21 are that these private enterprise
participation provisions are being ignored, because Section 5305(e)(3)
of the Title states that:
The Secretary may not withhold certification [that each
metropolitan planning organization in each transportation
management area is carrying out its responsibilities under
applicable laws of the United States] based on the policies and
criteria a metropolitan planning organization or mass
transportation grant recipient establishes under Section
5306(a) of this Title for deciding the feasibility of private
enterprise participation.
Section 5305(e)(3) discriminates directly against private
transportation operators. The power and role of MPO's were greatly
enhanced with the enactment of ISTEA in 1991 and even more so with the
enactment of TEA-21 in 1998. In the transit portion of TEA-21, the MPO
is required to be certified at least every 3 years, and it has to
certify that it complies with all applicable laws and regulations
except one. That one exception is the private sector provision of the
Federal Transit Act.
This anticompetitive, antiprivate sector provision should be
repealed from the Federal Transit Act because the only sections of the
Act that save the taxpayers' money are the Private Sector provisions of
the statute that require grant recipients to consider the utilization
of the private sector in the provision of public transit service. In
addition, the enforcement of Section 5305(e)(3) effectively neutralizes
the private sector participation requirement and removes the likelihood
that the MPO will make a decision that allows for competition in public
transit.
After the passage of TEA-21, the Federal Transit Administration and
Federal Highway Administration issued a memorandum on how their field
offices should proceed with the planning requirements of the law. The
document serves as a reminder to transit operators, State DOT's, and
Metropolitan Planning Organizations to ensure a basic level of
compliance with TEA-21's statutory language. There are eight
requirements covered in the memorandum including the following:
Consultation with transit users and freight shippers and
service providers: ``Before approving a long-range
transportation plan, each metropolitan planning organization
shall provide citizens, affected public agencies,
representatives of transportation agency employees, freight
shippers, providers of freight transportation services, private
providers of transportation, representatives of public transit,
and other interested parties with a reasonable opportunity to
comment on the long-range transportation plan, in a manner the
Secretary deems appropriate.'' (Emphasis added)
The law mandates a role for the private sector, yet at the same
time, Section 5305(e)(3) explicitly withdraws any enforcement of the
mandate. By hiding behind Section 5305(e)(3), many agencies do not
consider the role the private sector could play in improving the
quality and cost effectiveness of transportation services in their
area. The study published by the Transportation Research Board in 2001,
``Contracting for Bus and Demand-Responsive Transit Services'' reported
that 40 percent of all Federal transit aid recipients do not currently
contract at all. The Administration's Reauthorization bill repeals this
antiprivate sector Federal transit planning certification provision. We
urge that the Senate's reauthorization bill also repeal this provision.
Amend DOL Administration of the Federal Transit Labor Protection
Provisions
In April 2001, the House Subcommittee on Highways and Transit of
the Committee on Transportation and Infrastructure heard testimony from
Anthony Downs, a Senior Fellow at the Brookings Institution who was
asked to provide a report on the ``Future of U.S. Ground Transportation
from 2000 to 2020.'' In his testimony, Downs stated:
To a great extent, two types of archaic institutional
structures hamper approaching future ground transportation
rationally and efficiently. First,
existing means of governance in most metro areas are not
capable of managing regional growth so as to create
consistently higher densities in new-growth areas . . . The
second major institutional roadblock lies in the regulations
that govern public transit. Existing authorities bolstered by
transit unions want to maintain monopolies of very inefficient
large-scale systems that cannot achieve flexible approaches to
serving low-density residential areas. Yet such areas will
comprise the vast majority of all new areas we are likely to
build in the next two decades. . . Imaginative management of
public transit funds would encourage bidding for new types of
services by private entrepreneurs. But the political power of
transit unions and established institutions makes that
unlikely. . .'' (emphasis added)
Mr. Downs is not the first learned individual to recognize the role
unions play in stifling innovation in public transit because of the
hold Section 5333(b)--transit labor protection (formerly Section 13(c))
gives them over transit agency management. Section 5333(b) adversely
impacts transit operations in a variety of ways, but two are of
particular concern to private operators, including paratransit
operators:
<bullet> Restrictions on delivering transit services in a manner that
makes the most business sense, particularly the roadblocks that
5333(b) present to any legitimate competitive contracting efforts;
and
<bullet> Financial liability for 5333(b) claims, often in connection
with changes in contractors, regardless of whether the action
involved has any real connection to a Federal project or grant.
Private operators' concerns about Section 5333(b) arise not out of
its original intent, but rather out of how it has evolved and been
expansively interpreted by the Department of Labor over the years. As
the legislative history reflects, the original Section 13(c) was
designed by Congress to protect transit workers from adverse
impacts in employment that might result from Federal grants and to
protect the collective bargaining rights of employees of private
transit companies when those companies were purchased by public
entities with Federal funds. Clearly, given these Congressional
objectives, Section 5333(b) has been interpreted and applied far beyond
its original intent. Transit operators are being repeatedly frustrated
in their efforts to provide additional and cost effective transit for
the people they serve due to the threat of labor protection impediments
and costs. Some unions have used Section 5333(b) to block contracting
action, and to impose large costs that reduce or eliminate the
efficiencies in contracting for services. In April 2001, this
Subcommittee heard testimony from public transit officials representing
Sacramento, Little Rock, Las Vegas, Boston, New York, and Chicago--six
dissimilar cities, but all burdened and asking for relief from the
Section 5333(b) labor protections. Peter Stangl, Chairman and CEO of
the New York Metropolitan Transit Authority, summed up the concerns of
these six public transit representatives by stating:
``Current labor protection requirements, the ``13(c)''
provisions of the Federal Transit Act, apply to both capital
and operating budgets. A grant recipient's union must approve
both our capital and operating assistance
requests before FTA can proffer grants. Such sign-off
provisions give extraordinary control over a transit
organization to the unions and can be used to undermine more
traditional channels for resolving labor/management disputes.
The net effect of 13(c) is to deprive transit operators of the
ability to achieve reasonable productivity. Most critically,
the regulations do nothing to advance legitimate Federal
interests.''
The scope and nature of the 5333(b) protections required in
``change in contractor'' cases have continued to be a subject of major
debate. The Department of Labor has become increasingly sympathetic to
the efforts of the transit unions to include in 5333(b) protections a
requirement that contractors providing transit services for a Federal
grantee hire the workforce of the preceding contractor, and adopt the
terms of the existing collective bargaining agreements. The provisions
sought essentially provide a guaranteed right of continued employment,
a ``carryover'' of the then-effective collective bargaining agreement,
and if read literally, recognition of the existing union
representative.
Compounding the difficulty with the Department of Labor's position
is the fact that FTA grantees are faced with inconsistent, and
sometimes directly conflicting, imperatives from the Federal agencies
that play a major role in their funding. Specifically, grantees are
being told by the FTA that they must conduct periodic competitive
procurements for transit services and award to the successful proposer
under FTA's procurement principles; only then to be told by the
Department of Labor that they cannot take any action that would change
the existing workforce or their unions. These conflicting Federal
directives cannot be reconciled, leaving grantees in the untenable
position of trying to decide which agency to believe and whose rules to
follow.
A required carryover could have a significant adverse impact on
contracted services in the paratransit area. In particular, the
potential economic benefits of competitive contracting could be lost if
labor costs are effectively ``locked in'' from one contractor to the
next.
The Department of Labor had previously held that when a contract
for a fixed length has been properly terminated in accordance with its
terms, impacts which occurred solely as a result of the expiration of
the bid contract were not to be considered ``as a result of'' a Federal
grant, and thus would not give rise to 5333(b) protections for affected
employees. One major exception to the general rule was where the
applicable 5333(b) protections already in place explicitly required the
carryover of employees and/or the collective bargaining agreement.
The transit labor unions have been more aggressively pursuing
5333(b) provisions requiring a carryover of the workforce and
collective bargaining agreement, both in the context of negotiation
over the terms to be included in 5333(b) agreements and in the form of
5333(b) claims filed under applicable existing 5333(b) protections.
Section 5333(b)'s roots can be traced back to late 19th century
rail labor law. These protections basically provide that should a union
member covered by a labor agreement lose his or her job through the
actions of a Federal grant, that union member is entitled to
compensation of up to 6 years full salary. This onerous penalty, once
widespread across the United States, now only applies to two
industries: Amtrak and public transit.
Following are four core actions for how Section 5333(b) labor
protection provided for in the Federal Transit Act can be effectively
changed to make the transit labor protections less of an obstacle to
the efficient and effective provision of public transportation service.
1. The carryover of workforce issue needs to be addressed in the
Senate bill. This could be achieved by simply declaring that a change
in contractors is not an event that gives rise to 5333(b) protections.
In fact, a 1994 certification for the Regional Transportation
Commission of Clark County, Nevada, the Department of Labor agreed with
the grantee that ``neither Section 13(c)(1) nor (c)(2) provide
guaranteed jobs, but rather ensure that rights achieved through
collective bargaining with an employer are preserved and that the
process for negotiating labor contracts is continued with the employing
entity.'' The Department of Labor went on to state that 13(c)(1) and
(c)(2) ``standing alone do not operate to create new employment
relationships with a third party, nor do they require the hiring of a
predetermined
workforce.''
2. The Department of Labor's previous position that there is not a
required carryover of workforce should also extend to ``public to
private'' transitions where no employees are dismissed as a result of a
Federal project. Without such a declaration the universe of situations
in which a carryover of a workforce and its labor contract will be
required can continue to expand. Such expansion will have a significant
impact on transit systems that rely on private contractors for their
paratransit operations, and could have a significant impact on the
private contractors' ability to provide such operations, and even on
their willingness to contract with public transit operators to provide
such service.
3. Some FTA grantees have objected to binding interest arbitration
provisions in 5333(b) agreements. The Department of Labor has found
such objections ``insufficient,'' and in effect have frustrated
attempts by grantees to use different forms of dispute resolutions
(such as fact finding) for interest disputes other than binding
interest arbitration. The Department's action to deny the objections to
interest arbitration is in direct conflict with judicial precedent,
which has clearly held that interest arbitration is not a required
provision of 5333(b) terms. ATU v. Donovan 767 F. 2d 939 (D.C. Cir.
1985). By denying grantees' ability to object to interest arbitration,
grantees continue to be bound to interest arbitration that need not be
legally included in 13(c) provisions. Recent efforts to bind
contractors to the 5333(b) terms of grantees, would likewise require
contractors to be subject to binding arbitration in interest dispute
with their workforce.
4. It is suggested that the review of all FTA grants should be
limited to the review by the Federal Transit Administration. There is
no statutory requirement that these grants should be reviewed by the
DOL, and therefore, the practice should be statutorily ended. Transit
labor protection was enacted with the implementation of the Federal
Transit Act in 1964 and the subsequent regulations that were
promulgated over the years resulted in Federal transit grants not only
being reviewed by the DOT, but eventually by the DOL. Currently, ALL
Federal transit grants are not only reviewed by the DOL, but also those
grants are actually reviewed by private entities that have veto power,
the national union organization that would be applicable to that
particular public transit authority.
We believe implementation of these recommendations would go a long
way toward bringing a more level playing field to the competitive
bidding process at many transit agencies. We urge the Senate to include
language requiring these changes in the reauthorization legislation.
Need For Private Participation Requirements
There is ample, indisputable evidence that the Private Sector
Participation Guidance, developed and promoted by the Reagan and Bush
Administrations, was a great success raising the amount of contracting,
in just 10 years, from $10 million per year to over $500 million per
year. Public transit agencies, private operators, local governments,
and most importantly, the public itself can realize significant
benefits from contracting some public transportation services to
private operators.
<bullet> Benefits for the riding public include increased levels of
transportation services, increased convenience, and improved
service quality.
<bullet> Private operators typically realize increased income,
productivity, and exposure in their communities.
<bullet> Benefits for public transit agencies typically include cost
savings, the ability to serve a greater number and types of trip
needs, and allow a more productive allocation of union labor.
<bullet> Local governments typically realize cost savings and a higher
level of public transit services.
However, since the rescission of the Reagan-Bush Private Enterprise
Participation policies in 1994 by the Clinton Administration, the
private sector has been relegated to the back burner and is not even an
afterthought in the minds of many transit and government officials.
<bullet> Currently, 40 percent of all public transit agencies do not
contract any services. Even though there is a legislative
requirement to utilize private operators to the maximum extent
feasible, a very alarming 30 percent of these transit agencies
are led by general managers who state unequivocally that they never
consider contracting.
<bullet> Only three of the Federal Transit Administration Regional
Administrators were regional administrators when the guidance was
in place, so even high-placed FTA officials have basically dropped
private operators from their purview. It has been many years since
FTA officials have been instructed to assure consideration of the
private sector in leveraging public transportation investment and
to assure cooperation, not unfair subsidized competition, in the
efficient use of Federal transit grants.
<bullet> After FTA rescinded the Private Enterprise Participation
Policy, it withdrew the private sector guidances for its Capital
Program, Urbanized Area Program, Nonurbanized Area Program, Elderly
and Persons with Disabilities Program, and its Competition Policy
for Paratransit Activities. As the years have passed and new
employees have come into transit management positions,
consideration of private operators for contracting purposes is
ending. Just as consideration of private operators was virtually
nonexistent for 20 years after the Federal Transit Act of 1964
became law (until the Private Enterprise Participation Policy was
introduced in 1984); utilization and even consideration of the
private sector is now declining. Also, many States have revised
their guidance to operators and dropped private sector inclusion in
the planning process as a result of FTA backing away from enforcing
the private sector provisions in the Federal Transit Act.
<bullet> While it is true that the requirements of providing
complementary paratransit service required by the ADA has increased
the dollar volume of contracted transit services, the trend is for
transit agencies to take contracts back in-house. Altogether,
contractors provide about 15 percent of all bus and demand-
responsive vehicle hours, a percentage that has changed very little
during the past 5 or 6 years.
<bullet> Currently, the President's Management Agenda (PMA) promotes
contracting and outsourcing as a means to bring private sector
efficiencies into the Federal Government. Re-establishing a private
sector participation policy would help FTA and DOT meet the PMA
requirements.
The public private partnership approach to providing transit
services is a proven tool to achieve various public objectives
including cost control, enhancements of service quality and quantity,
and access to capital funding. However, as there are ever-increasing
demands for limited transit funds, the competitive approach offers a
means to provide current or new services at a reduced cost utilizing
the savings for existing transit services. TLPA urges the Senate to
require FTA to conduct a rulemaking to reestablish a private sector
participation policy. The end result would be an increase in the
efficiency and effectiveness of public transit operations in this
country.
Include the President's New Freedom Program in the Senate
Reauthorization Bill
President Bush has stated that his New Freedom Program is designed
to close the mobility gap for disabled Americans who currently do not
have adequate mobility options so that these persons will have ``the
opportunity to participate fully in society and engage in productive
work.'' According to Secretary of Transportation Mineta, the New
Freedom Program funds are intended to increase access to assistive
technologies and educational opportunities, and to enhance the
integration of disabled persons into the workforce and communities. The
Department of Transportation is charged with responsibility for the New
Freedom Program funding, underscoring the central role of
transportation in achieving the goals of the program.
Today, most public transit systems are largely accessible to
disabled persons as a result of public funding to meet the requirements
of the Americans with Disabilities Act. However, the privately owned
and funded taxicab and paratransit industry receives virtually no
public funding to provide service to the disabled. At the same time,
private operators provide an essential means of transportation for
people in urban, suburban, and rural areas. The industry is used on a
curb-to-curb basis, to reach other transportation facilities such as
bus and rail stations and airports, as well as workplaces, schools,
doctors, community centers, and other locations. Taxicabs are
ubiquitous, operating in over 2,000 communities and providing demand-
response service 24 hours per day, 365 days per year. For many people,
the disabled included, taxicabs provide the essential link between
home, the community at-large, and other transportation systems.
Taxicabs are more broadly available than municipal paratransit
services, which are generally available only with advance reservation,
for limited hours and then only in city centers and in areas three-
quarters of a mile from fixed-route bus corridors or rail stations.
Significantly greater accessibility for a larger number of disabled
persons could easily be achieved, consistent with the goals of the ADA,
were New Freedom Program funds made available to carry out a program
designed to close the mobility gap with respect to critically
important curb-to-curb transportation provided by the private taxicab
and paratransit industry. The program, which would be administered by
the Federal Transit Administration, would authorize funding to
qualified organizations (community groups or directly to taxicab
companies) for use in enhancing local transportation services for
disabled persons by working with private taxi-van providers to fund the
purchase, promotion, and operation of taxi-vans that meet Federal
accessibility requirements for vans and that serve persons requiring
accessible transportation to reach work, schools and other places in
the community at-large. The Administration's Reauthorization bill calls
for the program be modeled on FTA's Job Access and Reverse Commute
Program, that is projects must be derived from a locally developed,
coordinated public transit-human services transportation plan that is
developed through a process that includes representatives of public,
private, nonprofit transportation, human services providers, and
representatives of the general public.
The New Freedom Program could establish an immediate and meaningful
accessible transportation safety net, making 1 million accessible taxi-
van trips available per year. Assuming the program funded two-thirds of
the incremental cost of acquisition and the first year of incremental
operating costs, then for each $1.8 million in funding, approximately
125 additional accessible taxi-vans could be purchased nationwide.
These taxi-vans would dramatically increase the service area and hours
of availability of accessible transportation service. Each could
reasonably be expected to be available to transport two wheelchair
passengers per hour for about 12 hours per day, thereby collectively
serving 1 million disabled passengers annually who would not otherwise
receive this. The U.S. Department of Labor estimates that 70 percent of
employable people with disabilities are unemployed, 33 percent of these
people are attributing lack of adequate transportation as a key factor
in their inability to secure employment. The New Freedom Program, by
creating an accessible transportation safety net in the form of taxi-
vans, would be implementing a public-private partnership to help
integrate passengers with disabilities into the workforce and
community, thus expanding the transportation options for employable
people with disabilities.
The Administration's reauthorization bill states, ``subrecipient
means a State or local governmental authority, a nonprofit
organization, or a private operator of public transportation service
that may receive a grant under this section indirectly through a
recipient, rather than directly from the Federal Government.'' TLPA
urges that the Senate include the New Freedom Program in their
reauthorization legislation and to use similar language to the
Administration to ensure that private operators are eligible to
participate in the program.
Require that FTA's Special Needs Programs (JARC, New Freedom, and
Section
5310) Utilize the Same Planning and Eligibility Requirements
In the past 7 years, the Federal Transit Administration (FTA) has
introduced or proposed two innovative programs designed to meet the
special needs of two of the most transportation dependent groups: Those
with low incomes and the disabled. The Job Access and Reverse Commute
(JARC) grant program is designed to transport welfare recipients and
eligible low-income individuals to and from jobs and activities related
to employment. President Bush's proposed New Freedom Program would
provide for alternative transportation services to jobs and innovative
solutions eliminating transportation barriers faced by persons with
disabilities. Along with the FTA Section 5310 Elderly and Persons with
Disabilities Program, JARC and the New Freedom Program are FTA's
special needs programs. Each one of these programs has a slightly
different target audience, JARC (unemployed and welfare-to-work
individuals); New Freedom (disabled individuals whose needs cannot be
met by Americans with Disabilities Act accessible transportation
options); and Section 5310 (assisting private nonprofit groups and
certain public bodies in meeting the transportation needs of elders and
persons with disabilities). However, there are such similarities and
potential synergies among the programs, that TLPA urges that the Senate
require that each program be required to have uniform planning and
eligibility requirements using the JARC planning and eligibility
requirements as the guidelines. This request is also consistent with
the renewed emphasis on coordination of transportation resources at the
Federal level.
The issue of providing affordable, accessible, and safe
transportation for human services clients has been extensively
researched and promoted since the early 1970's. In October 1986,
Secretary of the U.S. Department of Health and Human Services Otis
Brown and Secretary of the U.S. Department of Transportation Elizabeth
Dole signed a historic joint agreement on the coordination of
transportation services funded by the two agencies. Every subsequent
Administration has renewed this commitment to coordination. In the past
17 years, the scope and reach of coordinated transportation services
has advanced to such an extent that one can find exemplary models of
coordinated activities in virtually every State. However, recent
changes in Federal social service programs principally the change from
serving children's needs in the Aid to Families with Dependent Children
program to serving the entire family's needs in the Temporary
Assistance to Needy Families (TANF) program; difficulties in funding
medical services, primarily the financial dilemmas States are facing
with the Medicaid program; and changes in the demographics of our
country, chiefly the increasing proportion of our population age 65 and
over, have fostered a renewed need for and commitment to coordination
at the Federal level. The Administration's reauthorization bill
requires any locality applying for funding for any of the three
programs (NFI, 5310, & JARC) must demonstrate that they have a local,
coordinated process that includes all the stakeholders: Public and
private operators, local governments, private nonprofit organizations,
and riders. Having a seat at the table should give private operators an
enhanced role in helping plan for and provide coordinated services.
TLPA supports having one streamlined program that has uniform planning
and operating requirements for recipient and subrecipient grantees.
The importance to private operators of having uniform planning and
participation requirements for these special needs programs cannot be
overstated. The Federal Transit Act requires that planners and grant
recipients ``shall encourage to the maximum extent feasible the
participation of private enterprise.'' However, because private
operators are not accustomed to Federal planning and procurement
processes, having to deal with different requirements for each and
every program is often mind numbing. By including language in their
reauthorization legislation requiring that FTA's three special needs
programs utilize uniform planning and participation requirements, the
Senate would further advance the private enterprise participation
requirements of the Federal Transit Act.
Conclusion
Competitive contracting is a tool that is available to public
transit agencies to assist them in managing their costs in these
current economic times where virtually every State and locality is
scrambling for dollars to overcome budget deficits. Competitive
contracting not only results in lower cost for public services that are
competitively contracted, it also induces improved cost performance
from the public agency. Contractors are the friends of the public
transit sector. They take over the least productive routes and usually
deliver a comparable or better quality of service at a lower deficit
rate. There is little evidence of any significant economies of scale in
the transit industry, particularly for large transit agencies, meaning
there is no real economic justification for protecting transit
properties from competition. Research shows consistently that unit
costs of delivering bus services rise when vehicle miles increase.
Thus, private firms that assist in serving high-deficit peak loads
should help reduce the scale of public operations to a more cost-
efficient level.
TLPA respectfully requests that the Senate consider including the
Association's five legislative proposals in their transportation
reauthorization legislation. Thank you for this opportunity.
<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
STATEMENT OF THE NATIONAL SCHOOL TRANSPORTATION ASSOCIATION
July 23, 2003
The National School Transportation Association (NSTA) is the
national trade association for private school bus companies that
contract with school districts to
provide pupil transportation. We offer a full range of services to our
school district partners, including: routing; driver training; vehicle
maintenance; student safety training; dispatching and operations; and
transportation both to and from school and to extracurricular
activities. Our members range from small family-owned operations with
fewer than five buses to large corporate entities operating thousands
of buses in multiple States, all of which are committed to ensuring the
safety of the students they transport.
Private school bus companies operate more than 150,000 yellow
buses, of the
nationwide fleet of 460,000 school buses and many of these companies
operate in areas not served by public transit. These vehicles, and
their drivers, are underutilized: They are idle for many hours of the
weekday and weekends throughout the school year, and are available at
most times during the summer. Contractors offer not only the vehicles
and personnel to operate them, but also expertise in safely and
effectively transporting passengers day in and day out, including
passengers with disabilities. Contractors also provide operations
management and financial management capabilities, as well as planning,
scheduling, routing, training, safety, and vehicle maintenance
expertise.
Public transit agencies must meet the challenge of serving
increasing numbers of people, particularly those who require
transportation service on an as needed basis rather than through
regularly scheduled fixed-route services. Human service agencies must
provide transportation to their constituents that is only ancillary to
the primary services they are mandated to deliver, yet this service is
of such importance that these agencies must spend an ever-increasing
portion of their limited resources allowing their clients to take
advantage of those primary services. Many people fall through the
cracks between available public transit service and human services
agency transportation, remaining entirely without service. These
individuals are not part of a constituency served by any particular
human services agency in their community, and public transportation is
either unavailable or cannot be expanded to accommodate them because of
the financial constraints of either the public transit agency or the
community. As a consequence, significant numbers of people requiring
transportation services simply cannot access such service. Yet in
communities throughout the United States, a valuable resource often
sits idle while agencies look for new resources to meet their growing
needs.
Many agencies have successfully subcontracted work to private
school bus contractors with vehicles available during nonschool service
time, yet this is not a widespread practice. Neither public transit nor
human service agencies are required to consider contracting for
transportation services. Furthermore, agencies are offered no
incentives to use available school buses as an option to save money and
maximize resources while providing transportation to those not
receiving it.
Public school districts throughout the Nation utilize private
school bus companies because they are able to provide a cost effective
alternative or supplement to district-operated transportation systems,
allowing school administrators to conserve scarce resources. Similarly,
transit and human resource agency administrators could benefit from
contracting with local private school bus operators to fill their unmet
service needs without acquiring additional costly equipment or
personnel.
Public policy rightly emphasizes mobility alternatives for the
elderly and disabled citizens. In addition, improved mobility and
greater access to jobs improves the quality of life for all Americans.
It is through the coordination of all transportation resources that we
are able to enhance the transportation alternatives available to every
citizen. Utilizing private school buses as part of a community
transportation system makes good fiscal sense and is operationally
practical; unfortunately, many agencies ignore the resources in their
own back yard. We ask that Congress provide the necessary incentives or
directives to encourage both public transit agencies and human resource
agencies to consider contracting with school bus companies to provide
needed services and maximize resources.
While NSTA supports the proposals in SAFETEA that reflect the
Administration's efforts to enhance mobility by offering greater access
to transportation through coordination of transportation resources, we
are concerned about one section of the bill. Section 3020 would amend
the current Section 5323 by revising Paragraph (2) to read as follows:
``(2) The Secretary may waive Paragraph (1) of this Subsection
if the Secretary finds that the provision of school bus
transportation by the applicant, governmental authority, or
publicly owned operator is necessary to meet the transportation
needs of students with disabilities.''
This language amends current law, which prohibits school bus
service by public transit systems receiving Federal funding.
Specifically, FTA grantees must agree not to use vehicles or facilities
that are subsidized by Federal dollars to compete unfairly against
private school bus companies that enjoy no such subsidy. This SAFETEA
provision would allow the Secretary to waive current law, under the
apparent perception that the transportation needs of some disabled
students are not being met.
This perception is false. The Individuals with Disabilities
Education Act (IDEA) requires that schools provide transportation for
every student with a disability if transportation is necessary for the
student to access his or her educational program. Any school that does
not provide proper and adequate transportation, including any
specialized equipment required by the student, is subject to sanctions
from the Office of Specialized Education Programs (OSEP) or the Office
of Civil Rights (OCR) in the U.S. Department of Education. This
requirement applies not only to transportation to and from school, but
also to transportation necessary to allow the student to participate in
extracurricular activities with his or her nondisabled peers.
The proposed change also raises significant safety issues as
transit and paratransit vehicles are not designed to the same safety
standards as school buses, nor are they subject to the same inspection
standards. Further, the drivers of public transit vehicles are not
trained and licensed according to the standards of school bus drivers
to ensure the safe transportation of students with disabilities.
For decades, school districts have been providing specialized
transportation for students with disabilities using private school bus
companies, and they will continue to do so. There is no service gap
that requires a change in the law. NSTA asks that Congress reject this
SAFETEA provision.
Thank you for the opportunity to testify before the Committee. If
we can provide additional information or service, please do not
hesitate to contact our Executive Director, Jeff Kulick, at 703-684-
3200.