Management & Operations

FTA Sifts Through Muddled Public, Charter Bus Service Issues

Posted on September 13, 2006 by Heidi Nye

For decades, the line between public transportation and charter service has not been neatly drawn, leading to criticism of public transit agencies by private operators, uncertainty on behalf of transit authorities and a good amount of confusion on both sides.

In March, the issue came to a head in a closely watched case in Ohio. Akron Metro Regional Transit Authority was found to have violated federal charter regulations at least 475 times between 2002 and 2005. This ruling, made by the FTA regional office in Chicago, allowed for the withholding of $622,500 in FTA funds from Akron Metro — one and a half times the estimated revenue it earned through illegal charter operations. The FTA may further penalize the transit authority by requiring it to return funds already received.

When Akron Metro appealed its case, Congress stepped in and mandated public- and private-sector operators to sit down at the negotiating table and hammer things out through a process specified in SAFETEA-LU when it was enacted last year.

On May 8 and 9, 17 industry and transit authority representatives and an FTA-appointed negotiator met in Washington, D.C., to do just that. Commenting on the initial meeting, Clyde Hart, senior vice president for government affairs at the American Bus Association (ABA), says he is “cautiously optimistic.” “There is a lot to get done, a lot that has to be sorted out, a lot of different viewpoints,” Hart says.

The ABA, he adds, would like to see the existing rules enforced by the FTA. The rules are designed so that private carriers continue to have the opportunity to bid on charter trips without running up against publicly funded agencies, who, because of the FTA funding they receive, may be able to offer the services for less than would be commercially feasible by a private carrier.

The 18-member FTA committee plans to continue meeting publicly in six-week intervals until December of this year to negotiate the eight issues they have deemed important (see sidebar). The committee hopes to reach a consensus on these issues so that the FTA can consider implementing them into regulation.

Evolution and confusion
Statutes governing public transportation and charter services date back at least to the mid-1960s. In general, public transit has been seen to exclude charter services; however, there are exceptions, and it is in this gray zone of exceptions that confusion has arisen. A 1966 decision by the Government Accounting Office (GAO), for example, held that a recipient of FTA funds may provide charter bus service on “an incidental basis,” defined as service that did not interfere with the transit agency’s ability to provide public transportation.

This statute was further clarified in 1974, when it was noted that an FTA funds recipient may not provide charter service “outside the urban area in which it provides regularly scheduled transportation service,” if, by so doing, it will “foreclose a private operator from providing intercity charter bus service if the private operator can provide the service.” This “willing and able” clause modified a provision from the previous year that called for a total ban on charter services outside the transit agency’s service area.

In 1987 and 1988, the FTA noted eight exceptions to charter prohibitions and did not distinguish between intracity and intercity service.

It is important to note that these statutes govern only those transit agencies that receive FTA funding. A city may offer public transportation without receiving FTA funds, as is the case in Santa Monica, Calif. Because local and state taxes and passenger fares bear the cost of Santa Monica’s public transit, it is not bound by FTA rules and may offer charter services as it sees fit.

Real or perceived problem? On Sept. 30, 2004, then-FTA Administrator Jenna Dorn testified before the House Committee on Government Reform:

“[E]ach year, FTA receives complaints or identifies [charter] violations … concerning only about 12 grantees — less than 1% of its grant recipients. Only one complaint over the last 10 years has alleged that a transit agency was utilizing equipment purchased with federal funds to provide services that competed unfairly with private companies. [I]t does not appear that there is a widespread problem.”

In contrast, Mike Waters, vice president of Coach America in San Francisco and an FTA rule-making committee member, is in the process of examining the 839 pages of complaints filed with the FTA since the 1970s. He is one-third of the way through the process and has found 50 complaints with significant merit to warrant closer scrutiny. In his estimation, many of the complaints were not given the serious treatment they deserved by the FTA and so died from inattention.

“We want some teeth put into the regulations,” Waters says. “Of course, it makes sense that a governing body that oversees funds to transit agencies would be a transit agency’s best friend. However, transit agencies know that they operate under certain restrictions, and anything beyond that, which shows a pattern of violations, should be met with partial withholding of FTA funds.”

Waters says that a few months ago, he was at Fisherman’s Wharf, a popular tourist spot in San Francisco, when he saw a transit bus 120 miles outside its service area. He contacted the transit manager, who was “totally unaware that he couldn’t do that.”

Tight budgets cited
FTA partially funds approximately 2,000 transit agencies throughout the U.S. As an example, Carl Sedoryk, general manager of Monterey-Salinas Transit (MST) in California and a member of the FTA rulemaking committee, says that MST receives approximately 25% of its operating costs from the FTA, 50% from local and state tax revenue and the remaining 25% from ridership fares.

“We think there is a role public transit agencies can play for special events and charitable organizations; however, so much depends upon the type of service,” says Sedoryk. “If it’s a closed-door event for a specific group of people for a single event and will not involve or benefit the community at large, it’s a clear-cut case for a charter company. But if it’s a community event and open to all, and service to and from the event would operate on or near existing public transit routes, well, that’s the reason we’re here — to service the public.”

Sectors seek improvements
Jack Burkert, a rulemaking committee member representing Trailways, says the negotiations are a “groundbreaking” means to solve a decades-old controversy over “who’s entitled to do what.” “Everyone in the room seems to be an honorable person, trying to work this out,” he says.

Results of the initial meeting seem to indicate that many transit agencies don’t have a great deal of interest in charter work, because it can be disruptive of their normal operations.

However, the private sector needs assurance that federally subsidized transit agencies understand that this is not a level playing field.

Rulemaking committee member Dan Duff, vice president of government affairs for the American Public Transportation Association, says all parties would like to see the regulations clarified, and that the appeals process could be improved, so that decisions made at the regional level are consistent. Duff also feels that the “FTA could do a better job of using the Internet to post decisions, so that both sides can easily review them.”

The Internet could also be used to more efficiently post charter work so that private carriers could view them quickly. If no carrier bids within, say, 72 hours, then the transit agency is free to offer the service.

When the rulemaking committee has done its work, the lines between public transit and charter operations will have been neatly drawn, to the satisfaction of the FTA and both the public and private sectors.

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