    [Senate Hearing 108-550]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 108-550

                       ENHANCING THE ROLE OF THE PRIVATE
                        SECTOR IN PUBLIC TRANSPORTATION

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

                                    HEARING

                                   before the

                   SUBCOMMITTEE ON HOUSING AND TRANSPORTATION

                                     of the

                                  COMMITTEE ON
                       BANKING,HOUSING,AND URBAN AFFAIRS
                              UNITED STATES SENATE

                          ONE HUNDRED EIGHTH CONGRESS

                                 FIRST SESSION

                                       ON

          THE CURRENT ROLE OF THE PRIVATE SECTOR IN PROVIDING PUBLIC
     TRANSPORTATION SERVICES, WHAT BARRIERS EXIST TO INCREASING THAT ROLE,
       AND WHAT MIGHT BE DONE IN REAUTHORIZATION TO REDUCE THESE BARRIERS

                                   __________

                                 JULY 23, 2003

                                   __________

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

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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:
     The shift of risk.
     Reduced cost and cost control.
     Increased flexibility and responsiveness.
     Financing of capital investment by the private sector allowing
        the maximizing of limited funds.
     Ability to manage service quality and reward good performance
        as well as establish financial and equitable penalties for poor
        performance.
     Creates a competitive labor environment allowing the private
        and public sectors to negotiate improved work rules and appropriate
        but fair wages and benefits.
     Allows public sector resources to be appropriately focused on
        planning and policy development for systems.

        Opponents historically attempt to confuse the issue by suggesting
    what we are
    advocating here is full privatization of public transit services. This
    is not the case. We are here to ask you to support legislative language
    within legislation 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.

                     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:

     Local officials have the authority to determine if, when, and
        how routes are evaluated;
     Local officials have the authority to determine what factors
        they use in determining whether to use private or public transit
        providers. Federal policy permits locals to determine the extent to
        which costs are considered and whether they want to use the fully
        allocated cost methodology or another cost approach;
     Local officials, in determining overall local process, may
        determine if a dispute process is appropriate, and, if so, what
        that process will be;
     Local officials, at their option, may take into consideration
        local situations that may affect decisions on transit providers;
     FTA reviews the local process as part of Triennial Review and
        verifies that the local process is being observed;
     FTA certifies the local planning process, which must follow
        Section 5306.

        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:

     ``Maintain control;''
     ``Not cost-effective;''
     ``No reason to change;''
     ``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.

                      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:

     Directly through lower service costs that typically ranged
        from 20 percent to 40 percent.
     Indirectly though ``ripple effect'' impacts on services that
        have not been competitively contracted. For example, San Diego
        began contracting in 1979, and as a result of the PEP Policy has
        converted 38 percent of its bus system to competitive contracting
        at an average cost saving of 30 percent. ``Ripple effect'' savings
        have reduced the costs of noncompetitive service by 25 percent per
        vehicle hour. In fact, through 1996, as a result of competitive
        contracting, San Diego system-wide bus costs per vehicle hour were
        $475 million less than if costs had risen at the industry rates
        experience by those agencies that do not contract.
     Private sector contractors pay local, State, and Federal taxes
        and the taxes paid by private operators benefit the public good.

        There are numerous examples in addition to San Diego Transit where
    the impetus of the FTA PEP Policy resulted in innovative services
    utilizing private operators. A few follow below.

     In Phoenix, AZ, the transit agency saved a significant amount
        of money by eliminating Sunday bus service and replacing it with a
        shared-ride taxi service.
     Ann Arbor Area Transit Authority eliminated its late night bus
        service and replaced it with a shared-ride taxi service.
     Transit Authorities in Dallas and Houston expanded service to
        growing suburban areas by contracting for express bus service.
     Denver Regional Transit District is required by State law to
        contract-out 35 percent of its fixed-route service, which it does
        at cost savings of 41 percent.
     Indianapolis contracts 70 percent of its bus system
        experiencing a cost per hour reduction of 22 percent.
     The city of Las Vegas contracts-out its entire system. Costs
        per vehicle hour dropped by 33.3 percent.
     Foothills Transit outside Los Angeles, contracts-out its
        entire system to private operators. Its ridership has risen by over
        50 percent, it has added 57 percent more service, and its fares
        have dropped by 37 percent.

        An often-quoted fallacy is that the savings to the transit agency
    are because the contract workers are paid a lower wage that the public
    transit employees. However, studies have shown that the lower
    contractor costs result from administrative efficiencies, improved
    management of the workforce, more productive work rules, better
    utilization of equipment and facilities, improved maintenance
    practices, and labor compensation consistent with competitive market
    rates.

    Rescission of the PEP Policy
        In 1993, in the early days of the Clinton/Gore Administration, a
    great deal of Administration governmental reform policy was based on a
    book entitled ``Reinventing Government'' by David Osborne and Ted
    Gaebler. The book specifically cited the FTA Private Enterprise program
    for its efforts to achieve competition and efficiency in the delivery
    of government services. In a letter protesting the rescinding of the
    PEP Policy by the Clinton Administration, Osborne stated, ``I believe
    the Private Enterprise Policy is indeed a model program. It simply
    requires local authorities to determine and consider the alternatives,
    public and private, in reaching transit
    objectives.'' He continued, ``The injection of competition into public
    monopolies is a fundamental principle not only of ``Reinventing
    Government,'' but of the Administration's National Performance Review,
    run by Vice President Al Gore. I serve as a
    Senior Adviser on the Performance Review. We are actively trying to
    increase, not decrease, the amount of competition in Federally funded
    services.'' Osborne's words fell on deaf ears. The PEP Policy was
    rescinded. Since the rescission of the PEP
    Policy in 1994, there have been no significant incentives to continue
    the more effective use of resources that result from the consideration
    of competitive contracting in the provision of public transportation.

    TLPA Legislative Program to Revitalize the Participation of Private
    Transportation Providers to the Planning and Delivery of Public Transit Services
        The infusion of competition into the provision of public transit
    services is important for a number of reasons including: (1) the need
    to guard against inequitable Government subsidized competition, (2) to
    guarantee efficiency and effectiveness in the expenditure of Federal
    mass transportation assistance through competition, and (3) to prevent
    duplicative expenditures. The following five legislative initiatives
    are designed to increase the participation of private operators to the
    maximum extent feasible as is called for in the statute.

    Repeal the Anti-Private Sector Federal Transit Planning Certification
            Provision
        The Planning Program provisions applicable to transit and
    metropolitan planning agencies are found in Section 5303-5306 of Title
    49 United States Code--Transportation. Section 5306(a) states: ``A plan
    or program required by Section 5303, 5304, or 5305 of this Title shall
    encourage to the maximum extent feasible the participation of private
    enterprise.'' Under Section 5306(c), the private enterprise
    participation requirements are defined as:

     Section 5306(c)(2) requires each recipient of a grant shall
        develop, in consultation with interested parties, including private
        transportation providers, a proposed program of projects or
        activities to be financed;
     Section 5306(c)(3) requires each grant recipient to publish a
        proposed program of projects in a way that affected citizens,
        private transportation providers, and local elected officials, have
        the opportunity to examine the proposed program and submit comments
        on the proposed program and the performance of the recipient;
     Section 5306(c)(6) requires each grant recipient to consider
        comments and views received especially those of private
        transportation providers in preparing the final program of
        projects.

        Unfortunately, the experiences of private operators with transit
    agencies and Metropolitan Planning Organizations (MPO's) for the past
    12 years under ISTEA and TEA-21 are that these private enterprise
    participation provisions are being ignored, because Section 5305(e)(3)
    of the Title states that:

            The Secretary may not withhold certification [that each
            metropolitan planning organization in each transportation
            management area is carrying out its responsibilities under
            applicable laws of the United States] based on the policies and
            criteria a metropolitan planning organization or mass
            transportation grant recipient establishes under Section
            5306(a) of this Title for deciding the feasibility of private
            enterprise participation.

        Section 5305(e)(3) discriminates directly against private
    transportation operators. The power and role of MPO's were greatly
    enhanced with the enactment of ISTEA in 1991 and even more so with the
    enactment of TEA-21 in 1998. In the transit portion of TEA-21, the MPO
    is required to be certified at least every 3 years, and it has to
    certify that it complies with all applicable laws and regulations
    except one. That one exception is the private sector provision of the
    Federal Transit Act.
        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:

     Restrictions on delivering transit services in a manner that
        makes the most business sense, particularly the roadblocks that
        5333(b) present to any legitimate competitive contracting efforts;
        and
     Financial liability for 5333(b) claims, often in connection
        with changes in contractors, regardless of whether the action
        involved has any real connection to a Federal project or grant.

        Private operators' concerns about Section 5333(b) arise not out of
    its original intent, but rather out of how it has evolved and been
    expansively interpreted by the Department of Labor over the years. As
    the legislative history reflects, the original Section 13(c) was
    designed by Congress to protect transit workers from adverse
    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.

     Benefits for the riding public include increased levels of
        transportation services, increased convenience, and improved
        service quality.
     Private operators typically realize increased income,
        productivity, and exposure in their communities.
     Benefits for public transit agencies typically include cost
        savings, the ability to serve a greater number and types of trip
        needs, and allow a more productive allocation of union labor.
     Local governments typically realize cost savings and a higher
        level of public transit services.

        However, since the rescission of the Reagan-Bush Private Enterprise
    Participation policies in 1994 by the Clinton Administration, the
    private sector has been relegated to the back burner and is not even an
    afterthought in the minds of many transit and government officials.

     Currently, 40 percent of all public transit agencies do not
        contract any services. Even though there is a legislative
        requirement to utilize private operators to the maximum extent
        feasible, a very alarming 30 percent of these transit agencies
        are led by general managers who state unequivocally that they never
        consider contracting.
     Only three of the Federal Transit Administration Regional
        Administrators were regional administrators when the guidance was
        in place, so even high-placed FTA officials have basically dropped
        private operators from their purview. It has been many years since
        FTA officials have been instructed to assure consideration of the
        private sector in leveraging public transportation investment and
        to assure cooperation, not unfair subsidized competition, in the
        efficient use of Federal transit grants.
     After FTA rescinded the Private Enterprise Participation
        Policy, it withdrew the private sector guidances for its Capital
        Program, Urbanized Area Program, Nonurbanized Area Program, Elderly
        and Persons with Disabilities Program, and its Competition Policy
        for Paratransit Activities. As the years have passed and new
        employees have come into transit management positions,
        consideration of private operators for contracting purposes is
        ending. Just as consideration of private operators was virtually
        nonexistent for 20 years after the Federal Transit Act of 1964
        became law (until the Private Enterprise Participation Policy was
        introduced in 1984); utilization and even consideration of the
        private sector is now declining. Also, many States have revised
        their guidance to operators and dropped private sector inclusion in
        the planning process as a result of FTA backing away from enforcing
        the private sector provisions in the Federal Transit Act.
     While it is true that the requirements of providing
        complementary paratransit service required by the ADA has increased
        the dollar volume of contracted transit services, the trend is for
        transit agencies to take contracts back in-house. Altogether,
        contractors provide about 15 percent of all bus and demand-
        responsive vehicle hours, a percentage that has changed very little
        during the past 5 or 6 years.
     Currently, the President's Management Agenda (PMA) promotes
        contracting and outsourcing as a means to bring private sector
        efficiencies into the Federal Government. Re-establishing a private
        sector participation policy would help FTA and DOT meet the PMA
        requirements.

        The public private partnership approach to providing transit
    services is a proven tool to achieve various public objectives
    including cost control, enhancements of service quality and quantity,
    and access to capital funding. However, as there are ever-increasing
    demands for limited transit funds, the competitive approach offers a
    means to provide current or new services at a reduced cost utilizing
    the savings for existing transit services. TLPA urges the Senate to
    require FTA to conduct a rulemaking to reestablish a private sector
    participation policy. The end result would be an increase in the
    efficiency and effectiveness of public transit operations in this
    country.

    Include the President's New Freedom Program in the Senate
            Reauthorization Bill
        President Bush has stated that his New Freedom Program is designed
    to close the mobility gap for disabled Americans who currently do not
    have adequate mobility options so that these persons will have ``the
    opportunity to participate fully in society and engage in productive
    work.'' According to Secretary of Transportation Mineta, the New
    Freedom Program funds are intended to increase access to assistive
    technologies and educational opportunities, and to enhance the
    integration of disabled persons into the workforce and communities. The
    Department of Transportation is charged with responsibility for the New
    Freedom Program funding, underscoring the central role of
    transportation in achieving the goals of the program.
        Today, most public transit systems are largely accessible to
    disabled persons as a result of public funding to meet the requirements
    of the Americans with Disabilities Act. However, the privately owned
    and funded taxicab and paratransit industry receives virtually no
    public funding to provide service to the disabled. At the same time,
    private operators provide an essential means of transportation for
    people in urban, suburban, and rural areas. The industry is used on a
    curb-to-curb basis, to reach other transportation facilities such as
    bus and rail stations and airports, as well as workplaces, schools,
    doctors, community centers, and other locations. Taxicabs are
    ubiquitous, operating in over 2,000 communities and providing demand-
    response service 24 hours per day, 365 days per year. For many people,
    the disabled included, taxicabs provide the essential link between
    home, the community at-large, and other transportation systems.
    Taxicabs are more broadly available than municipal paratransit
    services, which are generally available only with advance reservation,
    for limited hours and then only in city centers and in areas three-
    quarters of 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.

          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.