U.S. SENATE, COMMITTEE ON THE DISTRICT OF COLUMBIA, MEMORANDUM FOR MEMBERS OF THE SUBCOMMITTEE ON FISCAL AFFAIRS In re: S. 1813, to provide public assistance to mass transit companies in the District of Columbia; and S. 1814, to provide for public ownership of the mass transit bus system operated by D.C. Transit System, Inc., and to authorize interim financial assistance pending public acquisition of bus transit facilities. Hearing: 9:30 a.m., Tuesday, April 29, 1969, room 6226, New Senate Office Building. S. 1813 was drafted by the Washington Metropolitan Area Transit Commission (WMATC) which regulates bus fares and service within the metropolitan area. The bill proposes to reduce fares from 30 cents to 25 cents and to make up the difference between revenues at that rate and operating costs (including a 5.2 percent return on gross operating revenues) with a public subsidy. D.C. Transit, which furnishes 98 percent of the bus service in the District, would be the major beneficiary, although the much smaller, independent WVA bus company could qualify for payments as well. The Commission estimates that D.C. Transit would receive $5,905,632 in subsidy during the first year and a total of $19,021,509 over the three-year authorization proposed. This would be in addition to school fare subsidies now received and forgiveness of fuel and real estate taxes. As a condition of the subsidy, the bill requires D.C. Transit to give priority to meeting obligations to employee retirement and health and welfare programs. The company is currently about $2 million behind in its contributions. A further condition is that the company carry out a program of improvements with the Commission authorized to withhold subsidy payment for failure to comply. S. 1814 calls on the Washington Metropolitan Area Transit Authority (WMATA) to initiate negotiations with D.C. Transit for the purchase of all company assets. The bill gives Congress' consent to changes in the Interstate Compact establishing WMATA to permit the Authority to operate the bus company once it is acquired. Maryland and Virginia are given a period of three years in which to approve the changes. While negotiations for purchase of D.C. Transit are underway, an interim subsidy would be provided to keep fares at a just and reasonable level. The Commissioner of the District with the advice of WMATC and WMATA would determine the exact fare rate and the amount or the compensating subsidy to the company. The bill puts a three-year limit on payment of the interim subsidy and attaches the condition that priority be given to payment of obligations to employee pension and health and welfare funds. In addition, the bill asks that WMATA sit in on negotiations for a new labor contract which are due to begin in October 1969. The District Government has not taken a formal position on either of these bills. Subcommittee No. 3 of the House District Committee held hearings on S. 1813 (H.R. 9686) April 3 and 18, 1969. Attachments. JACK LEWIS, Associate Counsel. To grant a franchise to D. C. Transit System, Inc., and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, TITLE I PART 1.-FRANCHISE PROVISIONS D. C. Transit SECTION 1. (a) There is hereby granted to D. C. Transit System, Inc., a corporation of the District of Columbia (referred to in this part as the "Corporation") a franchise to operate a mass transportation system of passengers for hire within the District of Columbia and between the District of Columbia and points within the area (referred to in this part as the "Washington Metropolitan Area") comprising all of the District of Columbia, the cities of Alexandria and Falls Church, and the counties of Arlington and Fairfax in the Commonwealth of Virginia and the counties of Montgomery and Prince Georges in the State of Maryland, subject, however, to the rights to render service within the Washington Metropolitan Area possessed, at the time this section takes effect, by other common carriers of passengers: Provided, That nothing in this section shall be construed to exempt the Corporation from any law or ordinance of the Commonwealth of Virginia or the State of Maryland or any political subdivision of such Commonwealth or State, or of any rule, regulation, or order issued under the authority of any such law or ordinance, or from applicable provisions of the Interstate Commerce Act and rules and regulations 49 USC 27 prescribed thereunder. and ncte. (b) Wherever reference is made in this part to "D. C. Transit Definitions. System, Inc." or to the "Corporation", such reference shall include the successors and assigns of D. C. Transit System, Inc. (c) As used in this part the term "franchise” means all the pro visions of this part 1. SEC. 2. (a) This franchise is granted for a term of twenty years: Term. Provided, however, That Congress reserves the right to repeal this franchise at any time for its non-use. (b) In the event of cancellation of this franchise by Congress after seven years from the date this franchise takes effect for any reason other than non-use, the Corporation waives its claim for any damages for loss of franchise. SEC. 3. No competitive street railway or bus line, that is, bus or PUC certifirailway line for the transportation of passengers of the character cate for comwhich runs over a given route on a fixed schedule, shall be established petitive line. to operate in the District of Columbia without the prior issuance of a certificate by the Public Utilities Commission of the District of Columbia (referred to in this part as the "Commission") to the effect that the competitive line is necessary for the convenience of the public. SEC. 4. It is hereby declared as a matter of legislative policy that in Legislative order to assure the Washington Metropolitan Area of an adequate policy. transportation system operating as a private enterprise, the Corporation, in accordance with standards and rules prescribed by the Commission, should be afforded the opportunity of earning such return as to make the Corporation an attractive investment to private investors. As an incident thereto the Congress finds that the opportunity to earn a return of at least 62 per centum net after all taxes properly chargeable to transportation operations, including but not limited to income 29-234 0-69 Rates. All 70 Stat. 599. Charter and sightseeing services. Conversion to bus operation. Track removal. Taxes. taxes, on either the system rate base or on gross operating revenues would not be unreasonable, and that the Commission should encourage and facilitate the shifting to such gross operating revenue base as promptly as possible and as conditions warrant; and if conditions warrant not later than August 15, 1958. It is further declared as a matter of legislative policy that if the Corporation does provide the Washington Metropolitan Area with a good public transportation system, with reasonable rates, the Congress will maintain a continuing interest in the welfare of the Corporation and its investors. SEC. 5. The initial schedule of rates which shall be effective within the District of Columbia upon commencement of operations by the Corporation shall be the same as that effective for service by Capital Transit Company approved by the Commissioners of the District of Columbia pursuant to the Act of August 14, 1955 (Public Law No. 389, 84th Congress; 69 Stat. 724), in effect on the date of the enactment of this Act, and shall continue in effect until August 15, 1957, and thereafter until superseded by a schedule of rates which becomes effective under this section. Whenever on or after August 15, 1957, the Corporation files with the Commission a new schedule of rates, such new schedule shall become effective on the tenth day after the date of such filing, unless the Commission prescribes a lesser time within which such new schedule shall go into effect, or unless prior to such tenth day the Commission suspends the operation of such new schedule. Such suspension shall be for a period of not to exceed one hundred twenty days from the date such new schedule is filed. If the Commission suspends such new schedule it shall immediately give notice of a hearing upon the matter and, after such hearing and within such suspension period, shall determine and by order fix the schedule of rates to be charged by the Corporation. If the Commission does not enter an order, to take effect at or prior to the end of the period of suspension, fixing the schedule of rates to be charged by the Corporation, the suspended schedule filed by the Corporation may be put into effect by the end of such period, and shall remain in effect until the Commission has issued an appropriate order based on such proceeding. SEC. 6. The Corporation is hereby authorized and empowered to engage in special charter or sightseeing services subject to compliance with applicable laws, rules and regulations of the District of Columbia and of the municipalities or political subdivisions of the States in which such service is to be performed, and with applicable provisions of the Interstate Commerce Act and rules and regulations prescribed thereunder. SEC. 7. The Corporation shall be obligated to initiate and carry out a plan of gradual conversion of its street railway operations to bus operations within seven years from the date of the enactment of this Act upon terms and conditions prescribed by the Commission, with such regard as is reasonably possible when appropriate to the highway development plans of the District of Columbia and the economies implicit in coordinating the Corporation's track removal program with such plans; except that upon good and sufficient cause shown the Commission may in its discretion extend beyond seven years, the period for carrying out such conversion. All of the provisions of the full paragraph of the District of Columbia Appropriation Act, 1942 (55 Stat. 499, 533), under the title "HIGHWAY FUND, GASOLINE TAX AND MOTOR VEHICLE FEES", subtitle “STREET IMPROVEMENTS", relating to the removal of abandoned tracks, regrading of track areas, and paving abandoned track areas, shall be applicable to the Corporation. SEC. 8. (a) As of August 15, 1956, paragraph numbered 5 of section 6 of the Act entitled "An Act making appropriations to provide for the expenses of the Government of the District of Columbia for the fiscal All 70 Stat. 600. year ending June thirtieth, nineteen hundred and three, and for other purposes", approved July 1, 1902, as amended (D. C. Code, sec. 47-1701), is amended by striking out the third and fourth sentences 68 Stat. 118. and inserting in lieu thereof the following: "Each gas, electric-lighting, and telephone company shall pay, in addition to the taxes herein mentioned, the franchise tax imposed by the District of Columbia Income and Franchise Tax Act of 1947, and the tax imposed upon stock in trade of dealers in general merchandise under paragraph numbered 2 of section 6 of said Act approved July 1, 1902, as amended." (b) Notwithstanding subsection (a) of this section, the Corporation shall be exempt from the following taxes: (1) The gross sales tax levied under the District of Columbia Sales Tax Act; (2) The compensating use tax levied under the District of Columbia Use Tax Act; (3) The excise tax upon the issuance of titles to motor vehicles and trailers levied under subsection (j) of section 6 of the District of Columbia Traffic Act of 1925, as amended (D. C. Code, sec. 40-603 (j) (4)); (4) The taxes imposed on tangible personal property, to the same extent that the Capital Transit Company was exempt from such taxes immediately prior to the effective date of this section under the provisions of the Act of July 1, 1902, as amended; and (5) The mileage tax imposed by subparagraph (b) of paragraph 31 of section 7 of the Act approved July 1, 1902, as amended (D. C. Code, sec. 47-2331 (b)). 61 Stat. 328. D. C. Code 47 h. 15. D. C. Code 471207. Exemptions. 63 Stat. 112. D. C. Code 47 2601 to 47 2629. 63 Stat. 124. D. C. Code 47 2701 to 47-2714. 63 Stat. 128. 47 Stat. 555; 68 Stat. 119. Motor vehiole fuel tax. SEC. 9. (a) Except as hereinafter provided, the Corporation shall not, with respect to motor fuel purchased on or after September 1, 1956, pay any part of the motor vehicle fuel tax levied under the Act entitled "An Act to provide for a tax on motor vehicle fuels sold within the District of Columbia, and for other purposes", approved 43 Stat. 106. April 23, 1924, as amended (D. C. Code, title 47, chapter 19). (b) For the purposes of this section D. C. Code 471901 to 47-1919. (1) the term "a 62 per centum rate of return" means a 612 Definitions. per centum rate of return net after all taxes properly chargeable to transportation operations, including but not limited to income taxes, on the system rate base of the Corporation, except that with respect to any period for which the Commission utilizes the operating ratio method to fix the rates of the Corporation, such term shall mean a return of 62 per centum net after all taxes properly chargeable to transportation operations, including but not limited to income taxes, based on gross operating revenues; and (2) the term "full amount of the Federal income taxes and the District of Columbia franchise tax levied upon corporate income" means the amount which would have been payable in the absence of write-offs in connection with the retirement of street railway property as contemplated by section 7 of this part, but only to the extent that such write-offs are not included as an operating expense in determining net earnings for rate-making purposes. (c) As soon as practicable after the twelve-month period ending on Determination of August 31, 1957, and as soon as practicable after the end of each sub- tax by operating sequent twelve-month period ending on August 31, the Commission ratio. shall determine the Corporation's net operating income for such twelve-month period and the amount in dollars by which it exceeds or is less than a 62 per centum rate of return for such twelve-month period. In such determination the Commission shall include as an operating expense the full amount of the motor vehicle fuel tax which would be due but for the provisions of this section on the motor fuel purchased by the Corporation during the twelve-month period, and All 70 Stat. 601. Collection. Interest. Exemption certificates. 43 Stat. 106. D. C. Code 471901 to 471919. Real estate taxes. Effective date. Snow removal, eto. the full amount of the Federal income taxes and the District of Columbia franchise tax levied upon corporate income. The Commission shall certify its determination to the Commissioners of the District of Columbia or their designated agent. If the net operating income so certified by the Commission equals or is more than a 61⁄2 per centum rate of return, the Corporation shall be required to pay to such Commissioners, or their designated agent, the full amount of the motor vehicle fuel taxes due on the purchases of motor fuel made by the Corporation during such twelve-month period. If the net operating income so certified is less than a 62 per centum rate of return, the Corporation shall pay to such Commissioners, or their designated agent, in full satisfaction of the motor vehicle fuel tax for such period an amount, if any, equal to the full amount of said motor vehicle fuel tax reduced by the amount necessary to raise the Corporation's rate of return to 612 per centum for such period, after taking into account the effect of such reduction on the amount of the Federal income taxes and the District of Columbia franchise tax levied upon corporate income payable by the Corporation for such period. Within thirty days after being notified by the said Commissioners or their designated agent of the amount of the motor vehicle fuel tax due under this section, the Corporation shall pay such amount to the said Commissioners or their designated agent. (d) If not paid within the period specified in subsection (c), the motor vehicle fuel tax payable under this section and the penalties thereon may be collected by the Commissioners of the District of Columbia or their designated agent in the manner provided by law for the collection of taxes due the District of Columbia on personal property in force at the time of such collection; and liens for the motor vehicle fuel tax payable under subsection (c) and penalties thereon may be acquired in the same manner that liens for personal property taxes are acquired. (e) Where the amount of the motor vehicle fuel tax payable under subsection (c), or any part of such amount, is not paid on or before the time specified therein for such payment, there shall be collected, as part of the tax, interest upon such unpaid amount at the rate of one-half of 1 per centum per month or portion of a month. (f) The Commissioners of the District of Columbia or their designated agent are hereby authorized and directed to issue to the Corporation such certificates as may be necessary to exempt it from paying any importer the moto. vehicle fuel tax imposed by such Act of April 23, 1924, as amended, or as hereafter amended. (g) (1) From and after the time fixed in paragraph (2) of this subsection the Corporation shall not be required to pay real estate taxes upon any real estate owned by it in the District of Columbia and used and useful for the conduct of its public transportation operations to the extent that the Commission has determined under such rules and regulations as it may issue that the Corporation's net operating income in the previous year was insufficient, after giving effect to the tax relief provided in the preceding subsections, to afford it a 62 per centum rate of return. (2) This subsection shall take effect upon the completion of the program contemplated in section 7 of this part, as certified by the Commission to the Commissioners of the District of Columbia, or at such earlier time as the Commission may find that the said program has been so substantially completed that the taking effect of this subsection would be appropriate in the public interest and shall so certify to the Commissioners of the District of Columbia. SEC. 10. (a) The Corporation shall not be charged any part of the expense of removing, sanding, salting, treating, or handling snow on |