Congress cancelled the franchise of the Capital Transit Company and the District Commissioners publicly advertised and solicited firms to take over the transit operation. After consideration of a number of applicants, the Congress, in July, 1956, granted a francise to D.C. Transit System, Inc. to furnish urban transportation in this area. This was based upon certain mutual pledges and conditions, including a statement of legislative policy to the effect that if the Corporation did provide the Washington Metropolitan Area with a good transportation system, the Congress would maintain a continuing interest in the welfare of the Corporation and its investors.

Following the grant by Congress of the franchise in 1956, the D.C. Transit System proceeded to reorganize and revitalize the ailing mass transportation system then existing and to fulfill its part of the contract with Congress.

Two years ahead of scheduled time and within the first five years, the Company fulfilled its obligation to eliminate the trolley car system and establish an all-bus system. In so doing, the Company was compelled to destroy a street car system valued in excess of $45 million.

It is interesting to note that at the time of purchase the book value of the predecessor company was $23,879,041 (including a considerable amount of real estate which over the 13 intervening years has quite naturally increased in value as has all real estate in Washington). It is further interesting to note that contrary to some statements you may have heard not a single square inch of real estate has even been "spun off."

Our Company is presently composed of approximately 2,800 men and women who have dedicated their lifetimes to the problems of transportations in this area, and who through their joint efforts have develop a bus transit system in our Nation's Capital which is the finest and most modern system in the world. Transit experts from every continent, many of them under the auspices of our own State Department, visit our premises each year to learn the latest techniques and methods which we have developed for this highly specialized field of transportation. The visitors from far off countries such as Thailand, the Philippines, Australia, Sweden, Germany, Great Britain, and many other countries have studied the D.C. Transit method of operation and have expressed their admiration for our system. Only a few years ago, through the State Department, the Soviet Union requested that experts from the D.C. Transit System visit Russia to view and comment upon their system.

Computerized control methods, research and development of new modes and methods of transportation are normal items for our evaluation and development programs. We are acknowledged by all as the most modern transit system in the world.

The Company is constantly striving and struggling to keep expenses down by every method it can think up. However, the technology of bus transportation has not advanced to the extent it has in other fields where great savings can be effected. Indeed, the opposite is true because more complex equipment such as an air-conditioned bus requires greater cost, greater parts inventory, and greater maintenance. Radio dispatching and communication which are demanded today create a need for training in maintenance and installation that was not needed before.

Vandalism has reached proportions that have become serious in terms of expense.

Gasoline, oil, tires, and supplies continue to go up in price.

Eighty-two percent of our expense represents the cost of labor. Our Union contracts call for increasing wages and cost-of-living adjustments-which right now means an increase of 5 cents per hour on account of the last cost-of-living index increase, and a contract increase of 8 cents per hour in May. In addition, the Company has been required to set up a Pension Plan and a Health and Welfare Fund, which are advancements in the economic and social status of our employees. However, these social gains cause expenses to increase astronomically. We call your attention to the fact that our Company is a wholly-owned subsidiary of D.C. Transit of Delaware, which has approximately 10,000 stockholders. The stock is listed and traded daily.

Pursuing a course of progressive modernization, the D.C. Transit System was the first to introduce new air-conditioned transit buses in the United States and today owns the largest fleet of modern air-conditioned transit buses in the world. It also has the finest and newest maintenance base in the county which was constructed and equipped at a cost of more than $6,000,000. Today, this base cannot be duplicated for less than $10,000,000, and might well cost as much as $15,000,000.

It is worthy of more than passing notice to recall that several groups in 1956 were competing for the opportunity to provide mass transportation services to replace the Capital Transit operation. At that time, the Senate of the United States passed a bill providing that the sum of $20 million be made available for the purpose of instituting the operation of a publicly-owned system. The Senate, after reviewing the offer proposed by our Company, concluded that it would be in the best interest of the community to accept our offer rather than cause the City to incur this obligation and be saddled with the responsibility of owning and operating the transportation facility. It is an established fact that such public operation is far more costly and less efficient than a comparable system operated by private enterprise.

To date, the D.C. Transit System has invested, at no cost to the United States Government or the D.C. Government, $40,662,149 in the following capital improvement areas:

1. Buses

2. Buildings and land--

3. Miscellaneous equipment_-.

4. Shop and garage equipment.

5. Office equipment, computer equipment, furniture, etc---

$31, 438, 283

7, 631, 799

571, 760

523, 837

496, 470

The present values of the D.C. Transit System, including all of its real estate, is in excess of $75,000,000, less current and long-term debts. Our evaluation of the Transit System will be supported by nationally recognized transportation engineering firms who have made engineering appraisals in many major cities of the United States.

During the past 13 years, the Company kept its pledges to Congress to keep the City free from economic warfare and labor strife. As compared with other cities throughout the Nation, Washington, D.C. has enjoyed a clean bill of health with never a strike on the horizon of transit operations until the present crisis brought on by increasing expenses. Contrast this, if you will, with the ten preceding years of our Company's predecessor when each succeeding year brought confusion and disruption to public life.

The D.C. Transit System is proud of its relationsip with labor. George Meany, President of the AFL-CIO, in a testimonial address, stated, "The D.C. Transit System is the most outstanding example of enlightened management in the United States."

Our annual gross revenues are presently at the rate of $39,407,286, and during the past 13 years we have performed services for the community aggregating $383,447,101. The greatest portion of this $383,447,101 was spent and distributed within the Metropolitan Area of the District of Columbia. These monies represent a substantial contribution to the economy of all business interests, both private and public, in this area.

In short summation, we have worked hard to provide the Washington Metropolitan Area with the finest transit system in the world. This, I believe, we have successfully accomplished.

Further, the D.C. Transit System has consistently been recognized as the best operated and best maintained urban transit organization in the United States by the American Transit Association and the National Safety Council. I am sure it is interesting to note that this year, in spite of its limited working funds and revenues, the D.C. Transit System was presented with the Maintenance Efficiency Award by Fleet Owner Magazine, a McGraw-Hill publication, which is recognized as the standard criterion for bus companies in this Nation. We believe our record since 1956 has kept our faith with the Congress. We believe that we have furnished not merely a "good" transportation system, but an "excellent" transportation system.

Had the Transit Commission in prior years adhered to what was deemed reasonable by Congress in the franchise with respect to the establishment of rates of fare which would produce adequate rates of return, the D.C. Transit System would not be enmeshed in the financial crisis facing it today. With adequate rates of return the Transit Company could have accumulated since 1956 enough money to meet its obligations, consistent with the modern theory of utility accounting. Even if the prior Commissions had given the Company a rate of return through its entire period of operation equal to the currently authorized maximum rate of return, namely: 5.2 percent, the Company could have prevented the present situation. However, the fact is that over the entire 13 years net earnings have only been $3,567,576 from operations (0.93 percent of gross revenue).

A comparison of the rates of return allowed by the prior Commissions and the rates actually received by the Company will reveal that since 1960, the Company's actual rate of return has been lower each year than the Commission's projected rate with the exception of the year, 1963.

The foregoing history has been respectfully submitted to you so that you can understand our desire is to do the best we can in those areas which are within our power. The critical situation now existing has been beyond our power to control. For the past several years, the Company has been losing increasingly larger sums of money. During the year 1968 alone, the losses of the Company aggregated $1,715,787. These losses were incurred in spite of increased rates of fare which were not only long delayed in being granted but were inadequate to take care of the financial requirements of the Company. As a consequence, the Company, since 1967, has been unable to make current contributions to the Pension Plan and Health and Welfare Fund.

As I stated, the Company does not favor a subsidy as a matter or principle but recognizes it may be necessary as a practical matter because rising fares do impose a burden on many of our riders who can ill afford them. In addition, the Company knows, as Chairman Avery has stated, that although a fare increased revenues, it also means a decrease in riders who turn to other means of transportation thereby crowding the streets and parking places.

The only alternative to a subsidy is to seek a rate adjustment that will provide the funds to meet expenses. As is well known, the Company's income is closely regulated and all fares must be approved by the Washington Metropolitan Area Transit Commission, an agency created by the Congress. When the Company experiences a need for an increase in revenues to cover its increased costs, it applies to the Commission and makes the best case on the basis of fact to justify its need.

Neither the rate of return nor the net income projected by the Commission was realized in 1967 and 1968. The actual operations resulted in a loss of $256,050 in 1967 and a loss of $1,715,787 in 1968. Losses are continuing into 1969.

The rate of return projected in the Order was 5.24 percent (the rate as projected at the same time, March, 1967, by the Company for 1967, on the basis of its actual experience and knowledge of operations, was 4.04 percent). Actual operating results for 1967 show the rate of return for 1967 to be 3.26 percentnot 5.24 percent-before interest.

A similar situation confronts the Company as the result of the Rate Order of January 26, 1968, No. 772. This Order projected net operating income of $2,024,414 for the year 1968 out of which interest amounting to $1,300,000 must be paid or a net return of $924,414. This was estimated by the Commission to show a return of 5.24 percent-before interest.

The actual results show a net loss for 1968 of $1.715,787, including interest of $1,295,943, instead of the projected net return of $924,414.

Similar discrepancies of the past several years between theory and practice are shown below:

The average actual rate of return from 1957 through 1968 is 3.22 percent. The losses for the past two years are as follows:

1967
1968

$256, 050 1,715, 787

The results of our fare increase application may be frankly described as "too little too late".

You are most familiar with the catastrophic events during the past year which caused our Company serious damage to its equipment and paralyzing losses to its revenues. The Company obviously was in no way responsible for the civil disturbances which brought about this deplorable situation and caused the Company to suffer serious monetary losses in revenues. To make the problems even more intolerable, during the past year the Company faced staggering increases in wages and benefits brought about by a combination of unusually high cost-of-living increases in addition to the normal increments under the Union contract.

Over the past 18 months, discussion with the Union, who recognized the problems of the Company and cooperated in an outstanding fashion, have been of an amicable nature. In recent months, however, as the situation became more acute, we were pressed to submit a possible solution to the Union in connection with our payments to the Health and Welfare Plan and the Pension Fund. Our proposal is contained in a letter dated April 9, 1969 to the President of the Union, a copy of which is herewith submitted. Its contents are self-explanatory and offer alternative methods of payment which are based on a distasteful further fare increase or, as a preferred alternative, the concept of the proposed bill, S. 1813, which, in effect, would subsidize the riding public by reducing the fares and assuming the differential.

There is nothing further that we can add by way of comment on the unfortunate situation now facing us. The concept of solution by subsidy appears to be endorsed by newspapers and the general public. It certainly would be a means of guaranteeing the riding public a constant low fare of 25 cents without variation or further increase. This could conceivably solve many of the problems of downtown urban decay. It would encourage and promote greater ridership on mass transit and, undoubtedly, reduce the deplorable congestion of private automotive traffic. This reduced fare concept would be of particular benefit to the lower income bracket residents of the District of Columbia and in this respect D.C. Transit is happy to endorse it.

We wish to assure the Committee that we are heartily in accord with Section 3 of S. 1813, which provides for approval by the Washington Metropolitan Area Transit Commission of a comprehensive plan for the improvement of transportation services by participating carriers.

This provision not only provides for the submission of a plan acceptable to the Commission, but its implementation during the year in order that the carriers may be eligible for monthly subsidy payments. This will assure the public of a continuing adequate and dependable transporation system providing their transporation requirements.

With regard to S. 1814, a bill to provide for public ownership of the mass transit bus system and for other purposes, I do not agree that the best interests of the public would be served if the Company was purchased by the City. I believe that we must recognize that regardless of whether the Transit Company is operated by or for the City or by private enterprise, a subsidy will have to be provided. The amount of the subsidy would naturally depend upon the rate of fares which would have to be determined.

We are confronted with the question of what benefit the public would derive by acquisition and operation of the Transit Company since it still would be confronted with the payment of a subsidy. The only difference, as we see it, would be the elimination of the requirement of funds for dividends, and this would be more than offset by the interest paid on the bonds issued to cover the purchase. Interest rates today and those foreseeable are considerably higher than the highest rate of return authorized by the Washington Metropolitan Area Transit Commission.

We would like to state unequivocally that we are firmly against public ownership and for good reason. Public ownership assures no advantage to the public and, consequently, is not in the public interest. First, public ownership will not lower fares. Second, public ownership will not lower wages. Third, public ownership will not improve service without higher costs. Fourth, subsidies will be greater under public ownership than under private operation. Fifth, the cost of purchasing the system would be an unnecessary burden on the public. Sixth, public ownership in our Nation's Capital would bring state socialism another step closer to reality.

As a matter of fact, all of the aforementioned elements of operation would worsen under public ownership. The incentive to make a fair return would no longer be present. Political considerations which invariably accompany public ownership would lead to unnecessary increased personnel and to wasteful and inefficient service,

The natural assumption by the riding public is that, with public ownership, fares will be decreased and that service will be increased. Let there be no illusion as to what will happen. If fares are not increased to compensate for increased expenses, then subsidies in the form of additional taxation will have to be raised.

The acquisition of D.C. Transit System into public ownership would not eliminate regulations. Schedules, rates of return, fares-in fact, all phases of operation would still be subject to regulation.

Make no mistake about it. The results predicted under public ownership are based upon known facts. They have happened in every case, and will continue to happen in future switches from private to public ownership. In every city where there is public ownership fares are increasing, or subsidies are increasing, or both are increasing.

The concept of S. 1814 is contrary to the stated position of the Congress of the United States when it adopted S. 3073, Public Law 757, Chapter 669, 84th Congress, approved July 24, 1956, 70 Stat. 598, granting to the D.C. Transit System a franchise to operate a mass transit system in the Metropolitan Area of the Nation's Capital. In that franchise, congressional endorsement of the private enterprise system in the transit business in this area was clearly set forth as the controlling policy. I refer to and quote from the last sentence of Title I, Section 4 of the franchise which states: "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".

Furthermore, S. 1814 is contrary to the stated position of the Congress when it adopted H.R. 15588 of the 89th Congress. In that Act the Congress provided for private operation. S. 1814 eliminates this provision, and provides for the elimination of private operation of the subway system and places its operation in the Government.

The Act creating the subway system further prohibited and restricted the WMATA from entering into or competing with the private enterprise bus transportation system in the Metropolitan District. The present bill, as its prime purpose, endeavors to destroy the expressed will of Congress as set forth in the Act to which I have just referred, and establishes precedents for governmental ownership in all lines of endeavor.

I particularly invite this Committee's attention to Page 4, Line 3 of S. 1814 wherein the bill would amend Section 1 of Article 1 of the Transit Compact by deleting sub-paragraph (g) and substituting in lieu thereof the following:

"(g) 'transit services' means the transportation of persons . . . between points within the zone including sightseeing and charter service. . .;” The adoption of this bill would place the governments of the respective signatories to this bill in the sightseeing and charter service business in competition with sightseeing and charter service businesses which are totally dependent upon revenues received in sightseeing and charter service operations. Small mass transit operations in the Metropolitan District are highly dependent upon revenues received from sightseeing and charter service in order to maintain their respective operations and keep them on a profitable basis. Without these revenues, these companies would, undoubtedly, be defunct.

If the Congress establishes the principle of governmental ownership in preference to private ownership in this case, it means that every business in the country may look forward to eventual attack on the theory that in some way or other the Government could do the job better. This would indeed be a discouraging day in our history.

As a final commentary on the subject of public ownership, the trend should not be toward concentration of business in Government, but rather the opposite. This is evidence by recent studies finding that the Government is not providing the most efficient operation of the Postal Service.

This concludes my observations on some of the historical aspects of the pending bills and some of the substantive points relating thereto.

I would now like to bring to the attention of this distinguished Committee some of the controversial subjects about which there seems to be considerable misunderstanding.