[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


                    U.S. GOVERNMENT PRINTING OFFICE
95-184                      WASHINGTON : DC
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092250 Mail: Stop SSOP, Washington, DC 20402ï¿½090001


            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.
