The way it is now, the Commission allows or disallows non-labor expenses incurred, but resignedly accepts the obligations incurred by Transit in its labor negotiations, especially the last one. The result is that Transit has the highest wage level of any private company in the Nation, having come up from fifth place in 1955 (Capital Transit). It is now in fourth place in all cities (1968) from sixth place in 1967. It is exceeded only by New York, San Francisco and Boston, and is higher than publicly owned transit in Pittsburgh, Chicago and Detroit. However, until recently, it has had good labor relations. Returning to S. 1814, it further provides that the franchise "is hereby repealed". That sounds promising, but we read on and find it is effective when the Authority starts operating the buses, a doubtful possibility over the near term. The bill further provides that the Congress consents to certain amendments to the Authority Compact if the compact is amended within three years, and authorized interim assistance to the company. What happens if there is some hitch and the Compact is not amended within three years? The Act expires! What happens after that is left to the imagination. We can't see any point in expecting the Authority to “negotiate" from a position of weakness (no power of cancellation). Further, as to whether the Authority could be expected to protect the public interest if it did negotiate, we share the misgivings expressed in a letter to the Authority dated May 22, 1967, printed in the hearings on H.R. 7802 (1967) above cited, page 66. Other disadvantages of the Compact which need revision are there cited, and we commend them to your attention. In addition to those, we suggest that the Authority might be allowed to maintain its equipment and right of way without having to call in the TCA Development Corporation or similar organization, Sec. 51. This additional handicap was inserted by the Maryland delegation. The bill is an exercise in futility. The City administration should try again. ACQUISITION OF D.C. TRANSIT SYSTEM, INC. Under the D.C. Transit franchise, only the Congress at the recommendation of the District of Columbia, not the regional authority, has the power to revoke the transit franchise. With its history of excessive profits, transfer of transit assets of the operating company into other corporations, some subsidiary and some not, and its apparent success in getting all the rules arranged for its benefit, there is nothing to be gained by prolonging the existence of D.C. Transit System, Inc. The indicated procedure appears to be substantially the same as was used with Capital Transit Co. in 1955. We therefore recommend to the Congress that it: 1. Terminate the D.C. Transit franchise, effective immediately. 2. Allow the company to operate for a period of one year, with "interim relief" as provided in S. 1814. 3. Establish an interim city corporation or authority to take title to and operate the bus system with a view to ultimate transfer to the regional authority. A time limit for this purpose might not be desirable in view of the difficulties of revising an interstate compact. It would not be rushed through the way the original one was, which was announced to the public the same day it was submitted to the Maryland legislature. By the time it was rubber-stamped by the states and then submitted to Congress, it was too late to propose amendments to safeguard the public interest, although some tried. 4. Consent to, adopt and enact for the District of Columbia, amendments to cure the many defects of the original compact, some of which have already been alluded to. 5. Authorize the Authority to own, operate and repair the bus and subway systems. 6. Repeal the present statutory requirement for a private operator of the subway system, PL. 89-173, Sec. 3(b) (3), and PL 86-669, Sec. 205 (a) (2), prohibiting the Agency from acquiring the facilities of private motorbus companies and persons. 7. Appropriate such funds as are necessary to carry out the above-mentioned objects. It is thought that the authority bill passed by the Senate in 1955, hearings on H.R. 7802 above cited, page 90, would be preferable to S. 1814, except for the power to sell to a private operator. We don't want to go through that again. With the advent of the high-profit formula Regulation Compact, the time for bringing in another private operator has long since passed. Compensation to D.C. Transit for its acquisition need not and should not be the subject of "negotiation" under any circumstances. We believe that payment should be authorized only on the basis of the net depreciated value of physical assets, with no value attached to the franchise. When the city authority is set up, which we suggest be named "Washington Transit Authority", the Transit Commission would have only three relatively small companies to regulate. It might well be merged with the Transit Authority. It is fitting and proper that a city corporation or authority should own and operate the buses here since District residents constitute by far the largest body of transit patrons contributing revenues to the fare box. Suburban operations would not be affected by whoever happens to own the buses. We hope that the necessary steps will be taken to safeguard the public interest and insure continuity of transit service without the prospect of interruption of service which is returning to plague us as it did in 1955, with the difference that no strike is now in progress. There is still time. It is requested that the following joint papers by the American University Park and Friendship Citizens Associations be included in the record if practicable, at the pleasure of the Committee: Letters to the Mayor-Commissioner dated September 13 and 17, 1968. We appreciate the privilege of presenting this statement to your Committee. ACQUISITION OF D.C. TRANSIT SYSTEM, INC. WASHINGTON, D.C., September 13, 1968. Hon. WALTER E. WASHINGTON, Mayor-Commissioner, District Building, Washington, D.C. DEAR MAYOR WASHINGTON: The bus fare situation in consumer resistance to higher fares in the District is approaching crisis proportions. Even if the SchoolFare Subsidy is enacted this session, it would not hold bus fares at their present level under the usual rules because the operating expenses have increased more than the amount of the proposed subsidy. The Transit Authority had planned to pay its operating expenses and a third of the construction amortization with the basic fare of 25¢ mentioned on page 20 of the Metro Report adopted March 1, 1968, Washington Metropolitan Transit Authority. However, since the local subway fares will have to match the bus fares, however high, it is evident that the benefits of moderate fares will not be available even to rapid transit patrons so long as one segment of the city transit is privately owned. This will have a serious effect on transit patronage and on traffic congestion from the resulting increased use of individual vehicles. Further direct subsidization of D.C. Transit by the City is extremely unlikely. First, with no control over expenses, profits or dividends, the City Council would probably be unwilling to commit itself to further subsidy expenditures to a private company. A general subsidy (as distinguished from an allowance by the Authority to feeder bus lines for furnishing business to the subway) would constitute public underwriting of private profits, and the company would cease to be a "private enterprise" in the usual sense. For example, as brought out by the D.C. Citizens Council in its 1966 hearing, when Kansas City granted a $100,000 subsidy to the bus company, the company at the end of the year declared a $100,000 dividend. This somewhat dampened enthusiasm for the subsidy. Second, the company operates under a high-profit formula under the Regulation Compact which mentions only a return on gross operating revenues, although the Transit Commission since 1966 has not relied solely on the theory of a return on allowed operating expenses. Even if D.C. Transit were replaced by another private company, that company would still operate on the same compact. Third, the Transit Authority will eventually have to acquire the bus system here just as all other rapid transit cities have done, so that any stabilizing of bus and subway fares will be accomplished through the Authority. The experience of every other American rapid transit city has been that it is necessary to have community of ownership and operation of bus and rapid transit facilities. With the temporary exception of Philadelpha, where acquisition of the bus company by the Southeastern Pennsylvania Transportation Authority awaits only a bond issue, the other four rapid transit cities (New York, Chicago, Cleveland and Boston) have the bus and rapid transit services owned and operated by an authority or as in the case of Cleveland, by the City itself. The transit systems of the major cities are listed on page 61 of House District Committee hearings on HR 7802, May, 1967. Thus, of the 15 companies listed, only five are privately owned: Baltimore, Houston, Washington, Milwaukee and New Orleans. In New Orleans, the transit system is owned and operated by the gas and electric company and is subsidized by it. Mr. Robert Abrams of HUD, formerly with NCTA, can furnish further information on transit systems if desired. Phone, DU. 2–5374. While ownership and operation of the bus system by the Transit Authority is the logical and indeed the eventual solution of the problem of rising bus fares, the completion of this process may require time. The construction legislation and the Authority Compact are replete with provisions obviously designed to preserve intact the status of the local transportation companies as private companies, particularly D.C. Transit, including Sec. 205 (a) (2) of PL 86-669 against the acquisition of private companies by the Agency, and Sec. 56(a) of the Compact, PL 89-774, prohibiting bus operation by the Authority. It therefore may be necessary for the three jurisdictions to remove the restrictions placed upon the Authority. This obviously cannot be accomplished overnight. What concerns us now, and all who ride transit, is what happens in the meantime with steady increase in fares. Disadvantages of the present set-up include: (1) the problems of rearranging bus routes and correlating the operation of private and public transit lines, (2) the certainty of still further fare increases with intense consumer dissatisfaction, (3) tribute, though small, paid by suburban companies for the privilege of operating on city streets of Farragut Square, (4) interruption of plans to provide public visitor travel service on the Mall and to the Visitors' Center, (5) frequent and protracted rate proceedings and litigation, (6) high interest rates as compared with those available to a public body, (7) possible inflated value of the Company as a going concern due to past generous fare increases, and (8) possible damage suits if private operation is allowed to continue until the subway is running and loss in revenue to competing subway lines ensues, Compact Section 57. See Hearings, House Committee on the Judiciary, August 3, 1966, pages 50 and 213. With the Authority now having an appraisal of D.C. Transit System to be completed in November, it is possible that the results of this evaluation will result in a satisfacory arrangement with D.C. Transit to purchase the operating components of the system. We would hope that whatever agency acquires D.C. Transit will not pay more than the "going value" mentioned by Representative Harris in the franchise conference report, page 92 of the House hearings on HR 7802 (1967). If no arrangements can be made by the Authority within a reasonable time, the City should take steps to acquire the transit company. Such acquisition would not be revolutionary. In 1956, the Senate passed a bill providing for an "interim" public authority which could become permanent. House hearings on HR 7802 (1967), page 90. In the instant case, the authority could be interim until permission of the States to amend the Compact is obtained, if required, failing which the authority would become permanent. While city ownership would present some of the problems such as fare splits that would be true with a private company, it would eliminate many of those mentioned above. We are informed that if the City or a city corporation hired a private operator, the Transit Commission would regulate, but if the city itself or a corporation operated the system, the city would regulate it. The need to have the bus system publicly owned is much greater now than when the Capital Transit franchise was canceled in 1955 at the instance of the District Commissioners. That was largely a contrived crisis since the Public Utilities Commission had kept the company on a starvation diet, as seen in Judge Wright's concurring opinion in D.C. Transit System v WMATC, 350 F 2nd 753, 63 PUR 3rd 1, 31. After the company was thus softened up, the District Commissioners completed the job by refusing to lift the half-million dollar annual gross receipts tax on streetcar companies. This amount, at the price level of that time, would have enabled the company to offer a substantial wage increase and almost certainly avoid the strike. The company's wage level at the time was almost certainly avoid the strike. The company's wage level at the time was third among ten private companies. After the strike had settled the fate of the company, the Commissioners lifted the tax and offered many other concessions to bidders for an extravagent all-bus system. This raises a strong presumption that the Commissioners were willing to put the public through the ordeal of a strike in order to eliminate Capital Transit and its streetcars and offer a new high-profit franchise to a new all-bus company. Their further desire to make Capital Transit "tear up its tracks and get out of town" was not possible of realization since no manufacturer could be found who could deliver 1000 buses in a year's time. The D.C. Transit policy of selling for the benefit of the stockholders or transferring to subsidiary corporations the properties no longer needed because of cessation of streetcar service or because of consolidation of shop facilities has caused a loss to the public which would not have occurred if the City had acquired Capital Transit Co. in 1956. For example, the City may have to pay $1,088,000 for the carbarn at 14th and East Capitol Sts., as a site for a recreation center which it could have had for nothing. The equivalent of the rail equipment repair shops now occupied by Chalk House West will have to be provided for the subway system and the financing started anew. We support the recommendations of the D.C. Citizens Council on D.C. Transit System printed in House hearings on HR 7802, pages 50-63. For the reasons above stated, private operation of D.C. Transit, in our opinion, is no longer compatible with the public interest. It is necessary that part of the burden of increased transit costs be borne by the public which will benefit from reduced street use, etc. Accordingly, we request that the City Council recommend legislation to the Congress canceling the D.C. Transit System franchise and setting up an interim authority with power to acquire the operating properties of D.C. Transit System, Inc., to be operated by such authority until such time as transfer can be effected to the regional authority. Respectfully, ALFRED S. TRASK, President, American University Park Citizens Association. President, Friendship Citizens Association. AMERICAN UNIVERSITY PARK CITIZENS ASSOCIATION, Re Acquisition of D.C. Transit System, Inc. District Building, Washington, D.C. Washington, D.C., September 17, 1968. DEAR MAYOR WASHINGTON: In negotiations with Mr. Chalk for the purpose of acquiring the D.C. Transit System, the City would have an advantage over the Transit Authority since the Authority has no power of condemnation, that is, no leverage on the seller, whereas the City can put the pressure on in its power to recommend revocation of the franchise, whether exercised or not. On the prohibitions in the Compact, some in the Authority claim the Authority can buy the system if Mr. Chalk wants to sell-hardly much of a prospect. Another factor is that the Authority includes personnel who drafted the company-oriented Compact and therefore for one reason or another might give the Company favorable terms at public expense. See the last two paragraphs of the letter on page 66 of the May, 1967, hearings on HR 7802. It would, we think, be improper for the City if it acquires control to use the bus system to carry "sociological obligations" as mentioned by Mr. Spear in his argument in the fare case, such as instituting a special fare structure which might have to be changed by the Authority later, other than using City funds to keep the bus fares at a moderate level. After the Authority takes over, the expected surplus in operating income over expenses would serve to keep all fares lower than they would be with a private bus system. Of course, some subsidy could be called for if neccessary. The only danger we can see in City bus ownership is that the Authority might decide to let the City keep the buses and their losses rather than dilute the earning power of the subway. However, the advantages in unified control are so many that we can't see that happening. Further, the City as owner and operator would have control over suburban fares in Maryland! Respectfully, President, American University Park Citizens Association. ALFRED S. TRASK, ELLIS HAWORTH, President, Friendship Citizens Association. JOINT STATEMENT OF THE AMERICAN UNIVERSITY PARK CITIZENS ASSOCIATION AND THE FRIENDSHIP CITIZENS ASSOCIATION ON THE ACQUISITION OF D.C. TRANSIT SYSTEM, INC. October 9, 1968. 1. We concur in the recommendation of the City Council Highways and Transportation Committee to have the city government purchase the D.C. Transit System. We would go further than that. We would urge that the city government cancel the Company's franchise in order to avoid any possibility of paying any more than the "going value" mentioned by Congressman Harris in the franchise bill conference report, page 92, Hearings on HR 7802, May, 1967. We reluctantly come to this conclusion since we firmly believe in private enterprise whenever it can do the job efficiently at a price acceptable to the public. Particularly in the latter respect, we believe that the usefulness of this company to the District is at an end. 2. Local transit troubles started when the SEC under the Public Utility Holding Company Act of 1935 dismembered the conservative North American Company as holding geographically separated properties (How about Trans-Caribbean Airways?) and required North American to divest itself of Capital Transit, which had but recently commenced operations as a merged company. It would have been better for the public if the Congress had adopted either the Senate Authority bill or the House Capital Transit bill in 1956. Ibid. pp. 90991. 3. The Company has long held out to the public that it has never had a strike such as befell Capital Transit in its last days. The fact that the increase in operating and non-operating wages including cost-of-living adjustments for the year ending July 31, 1969, is $2,060,859 as compare with last year's increase of $1,115,000 is indicative that the cost of its good labor relations comes high. The Company has not had to contend with a hostile regulatory commission as did the Capital Transit Company, nor with a Board of Commissioners such as in 1955 denied Capital Transit any relief from its half-million gross receipts tax until after the strike had settled the fate of the Company. 4. As compared with the much maligned Wolfson interests, which kept intact the transit properties it purchased, the D.C. Transit System when it took over immediately started syphoning off for the benefit of the stockholders any company assets not actually required in the operation of buses, including Glen Echo Park, a non-operating property. By the simple expedient of moving a shop from one location to another, the old location immediately became a "non-operating" property, courtesy of a compliant Commission, and the appreciating land sold off or transferred to a subsidiary company. The land for Chalk House West is one example. The equivalent of the rail equipment repair shops located there will have to be provided anew for the rapid transit system. The transit riders received no benefits from the sale of real estate made available by the consolidation of repair facilities at Bladensburg Road. The City will have to pay $1 million for the site of the East Capital St. barn for a recreation center. 5. Besides seeking, and often getting, excessive earnings, the Company has amply demonstrated that it puts company interest above the public interest. It is partly a matter of attitude. Its application in 1964 to sell off five "off-street" terminals, former streetcar loops, is enlightening. The Calvert St. loop at Rock Creek was one of them. It contained a former interurban station which for five years successfully accommodated bus operations. Shortly after the Company petitioned to abandon it, a bus conveniently collided with the station building damaging it beyond repaird, and it was torn down. The patrons have waited out in the rain ever since. The Company couldn't care less. What happened to the bus was not stated, but it was probably repaired (as an operating expense) and put back into service. Sometimes a bus is as good as a bulldozer. 6. With the recent acquisition of the Philadelphia Transportation Company by the Southeastern Pennsylvania Transportation Authority, every city in the Nation having rapid transit owns by itself or through an authority the city bus systems. It is not clear why Washington should be an exception. 7. As stated in our letter of September 13, while the normal procedure would be for the Washington Metropolitan Transit Authority to acquire D.C. Transit and own and operate both systems, the company-oriented authority compact prohibits its performing transit service by bus. Until that mess is straightened out, presumably by resubmitting the compact to the three jurisdictions for revision, any acquisition in the readily foreseeable future will have to be undertaken by the City, preferably through a city corporation with its own board of directors. As pointed out at one time by Mr. DeWitt Hyde of the Cleveland Transit System, |