DOCUMENT RSUME

0177, - A0590650]

Private CoLpanies Should Receive More Consideration in FederalMass Transit Programs. CEI-77-8; -16949i. December 10, 1976. 21pp. + 2 appendices.

Yeport to the Congress; by Elmer B. Staats, Ccmptrcller General.

Issue Area: Transportation Systems and Policies: Movement ofPeople in Urban Areas (2403).

Contacts Community and Economic Development Div.Budget Function: Commerce and Transportation: Grcund

Transportation (404).Organization Concerned: Department of Transportation; Urban ass

Transportation Administration.Congressional Relevance: House Committec on Appropriations:

Transportation Subcommittee; House Committee on Public Worksand Transportation; Senate Committee on Banking, Housing andUrban Affairs: Housing and Urban Affairs Subcommittee;Co ngress

Authority: Urban ass Transportation Act of 1964 (49 U.S.C.1601). Housing Act of 1961 (P.L. 87-70, sec. 303).

Private mass transit operators were surveyed to obtaingeneral information about the mass transit industry and itsrelationship with the Urban Mass Transportation Administration(UNTA). Findings/Conclusions: Most of the rivate mass transitcompanies who responded carried fewer than 200,000 personsannnally and were not financially sound. Private operators donot understand UNTA's financial assistance programs. AlthoughUNTA has not actively discouraged private operators from seekinggrant assistance, it has not encouraged then to obtainassistance or determined whether such operators need help inmeeting procedural requirements for financial assistance. UMTA'sprimary method of preserving existing transit services has beento provide about $200 million in Federal grant funds to assistcities in acquiring private mass transit companies. UMTA'spolicies and procedures do not adequately consider privateoperators. Rrcommendations: To assist private operators, UMTAshould inform private companies about available Federalfinancial assistance programs, and provide assistance inapplying for Federal grants. ({RS)

REPORT TO THE CONGRESS

BY THE COMPTROLLER GENERAL-' + t " OF TH.E UNITED STA TES

Private Companies Should ReceiveMore Consideration in FederalMass Transit ProgramsUrban Mass Transportation AdministrationDepartment of Transportation

The Urban Mass Tiansportation Administra-tion's grant program benefits public andprivate companies. Public companies can ap-ply directly for funds but a private companymust be sponsored by a public agency. Mostprivate companies were not financially soundand did not seek financial assistance. Somesaid this was because they did not understandthe program; others said they could not find apublic sponsor.

The law provides protection to private opera-tors by assuring that no assistance shal, beorovided to an applicant unless its transp3rta-tion program provides for maximum prtici-pation of private operators. The agency hashad no clear policies to determine this.

CED- 77-B,

CN3MPTrO OJR NRAL OF TwH UNITD VTATWAHINOIO D. 1

B-169491

To the President of the Senateand the Speaker of the House of Representatives

This is our report on the private mass transit industryand the industry's relationship with the Department of Trans-portation's Urban Mass Transportation Administration. Itdiscusses the Federal agency's need to be more concerned withprivate mass transit operators.

We made our review pursuant to the Budget and AccountingAct of 1921, (31 U.S.C. 53), and the Accounting and AuditingAct of 1950, (31 U.S.C. 67).

We are sending copies of this report o the Director,Office of Management and Budget, and to the Cecretary ofTransportation.

Comptroller Generalof the United States

C o n t e n t s

Page

DIGEST i

CHAPTER 1

1 INTRODUCTIONScope of review 3

2 UMTA AND PRIVATE TRANSIT COMPANIES 5UMTA financial assistance

affecting private mass transitcompanies 6

Recommendations and agencycomments 7

CharacteListics of private masstransit companies 7

Private operators lack a clearunderstanding of UMTA's programs 11Conclusions 13Recommendations 13Agency comments and our

evaluation 14UMTA's policies and proceduresdo not adequately considerprivate operators 15

Conclusions 19Recommendations 20Agency comments and ourevaluation 20

APPENDIX

I Letter dated October 1, 1976, from theAssistant Secretary for Administration,Department of Transportation 22

II Principal officials responsible foradministering activities discussedin this report 28

ABBREVIATIONS

MPO Metropolitan Planning Organization

UMTA Urban Mass Transportation Administration

COMPTROLIER GENERAL'S PRIVATE COMPANIES SHOULDREPORT TO THE CONGRESS RECEIVE MORE CONSIDERATION

IN FEDERAL MASS TRANSITPROGRAMSUrban Mass TransportationDepartment of Transportation

DIGEST

In 1964 'e Congess passed the Urban MassTransportation Act, designed to providefinancial assistance to both public andprivate mass transportation systems. Con-gressional debate indicates that the actwould hlp save the private transit industry.

Whereas public agencies can apply directly tothe Urban Kass Transportation Administratiorfor urban mass transportation funds, privatecompanies cannot. But, private mass transitcompanies may benefit through contracts withpublic agencies. (See pp. 2 and 6.)

The Transportation Administration did not knowhow many private companies existed and did nothave a system to inform the companies of theagency's financial assistance program.(See p. 13.)

Historically, public transit systems havesolicited and obtained Federal mass transitfunds more than private transit systems. Asof September 30, 1976, about $5.7 billion wasapproved for capital grant projects. Almost$5 billion benefited about 300 public transitsystems; and $725 million benefited 127 privatetransit systems, 20 of which were later takenover by public agencies. About 90 percent ofthe public transit systems have received Fed-eral assistance, compared to about 16 percentof the private transit systems. (See p. 6.)

Nationally, private bus and rail companiescarry about 10 percent of the Nation's masstransit passengers. Even though this is asmall percent of the total, without theseprivate companies many people may have to useprivate automobiles. (See p. 5.)

lam S Yt. Upon removal, the repot i CED-77-8o5W _&_W should be noted hereon.

To obtain information about the private masstransit industry and'its relationship to theUrban Mass Transportation Administration, GAOmailed questionnaires to 682 private mass tran-sit companies, and 450 responded. Most of thesecompanies, except for commuter railroads, weresmall firms and were not financially sound.The majority of the respondents said they couldnot meet all capital and operating needs fromtheir operating revenues; however, most of themdid not seek Federal financial assistance.(See pp. 3 and 11.)

Some did not apply because they did not under-stand the Urban Mass Transportation Administra-tion's financial assistance programs. Theyeither doubted their eligibility for Federalassistance or did not understand the applica-tion policies and procedures. Others couldnot find public agencies to sponsor theirapplications. (See p. 11.)

To help private operators, the Urban MassTransportation Administration should:

--Inform the existing private cmpanies aboutthe Federal financial assistance programs,and, where necesssary, provide tese com-panies with assistance in applying forFederal mass transit grants.

--Identify reasons why private operatorscannot find a public agency to sponsor theirapplications and determine possible remedies.(See p. 13.)

Two sections of the Urban Mass TransportationAdministration Act provide protection forprivate companies. Under section 3(e), anapplicant shall not receive financial assist-ance unless an officially coordinated trans-portation program for the applicant's areaprovides, "to the maximum extent feasible,"for private companies to participate in masstransit operations. Section 4(a) states thatno Federal assistance shall be providedfor facilities and equipment unle.s suchassistance is needed to carry out a program foran officially coordinated transportation system.Such a program should encourage "to the

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maximum extent feasible," the participationof private enterprise. (See p. 15.)

Urban Mass Transportation Administration offi-cials disagree about the meaning of rection3(e) and have had difficulty interpreting thephrase "to the maximum extent feasible." Theyhave no clear policies or criteria for making3(e) findings. Although a 3(e) finding is nowin every grant file, it is simply a standardstatement that the finding is justified, withno specific documentation. Without criteriaexplaining what constitutes such findings,it is not clear what documentation would besufficient. (See pp. 16 and 18.)

In the past, the Urban Mass TransportationAdministration's Li Ltions and certifica-tions of the transportation planning process,required by section 4(a) have not referred toprivate companies; and, provisions have not beenmade for including private companies in transpor-tation plans and rograms. No internal agencyguidelines tell agency planning staif to lookfor section 3(e) issues in transportaton plansand programs. Neither potential planners norapplicants are required to ask private com-panies how proposed transportation plans andprograms will afect them. (See p. 16.)

If private companies are to be adequatelyconsidered, the Urban Mass TransportationAdministration should:

--Establish written criteria for making 3(e)findings and require documentation in grantfiles supporting these findings.

--Include in its instructions to grant appli-cants information on what is needed to showthat private companies have been included"to the maximum extent feasible." Thecriteria which is used to nake 3,e) findingsand a requirement that private companies beidentified and given written notice of publichearings for grant apiications should be partof these instructions.

-- Include in ita instructions to urban masstransportation planners requirements that theyperform a 3(e) analysis, which includes written

Tar. Shlt· iii

comments by private companies on what effectthe transportation plans or programs willhave on them, and that they give thisanalysis to the Urban Mass TransportationAdministration.

-- Issue internal instructions requiring UrbanMass Transportation Administration planningstaff to consider section 3(e) and 4(a) issueswhen making annual certifications and evalua-tions of the transportation planning process.(See p. 20.)

The Department of Transportation said (1) thatthe Urban Mass Transportation Administrationrecognizes tlat private companies need moreopportunities for involvement in localtransportation programs and (2) that recentagency activities strengthen that involvement.The Department also said that:

-- More efforts will be made to inform privatecompanies of the mass transit financial assist-ance programs.

---Identifying reasons why private companiescannot find public agencies to sponsor themand determining possible remedies by conductinga special study are of limited usefulness butif possible, when such matters are brought toits attention through routine procedures, thereasons for lack of public agency sponsorshipwill be identified and remedies sought.

--Proposed rules to be published in the Fed-eral Register will implement sections 3(e)and 4(a) of the act.

--The new external operating manual will re-quire that evidence to support a 3(e) findingbe included in transportation programs.

-- Internal instructions will be issued on 3(e)and 4(a) issues once its external operatingmanual and proposed rules &re completed.(See app. I.)

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CHAPTER 1

INTRODUCTION

During the early part of the twentieth century, masstransit prospered. By the late 1920s almost 14 billion reve-nue passengers were riding mass transit annually. However,with the growing popularity of the automobile, ridershipbegan to decline. By 1933, ridership ws down to 9 billionre' rue passengers.

During World War II, with gasoline rationing and no newautomobiles being manufactured, people turned to mass trans-portation for their travel needs. In 1946, the alltime peakyear, 19 billion revenue passengers used mass transit. However,after the war, as the Nation grew and prospered, people becameincreasingly dependent on the automobile and the mass trans-portation industry once again began to decline. Faced withdecreasing ridership and increasing costs, private investorswithdi w capital from the mass transit business. The numberof pri te transit companies (bus and rail) fell from 1,380in 1950 to 614 in 1975. The following table illustrates thisdecline for selected ears.

Number of privateYear transit companies

1950 1,3801955 1,4501960 1,1971965 1,0701970 9351975 614

In srme cases the demise of private mass transitcompanies resulted in no mass transportation and an in-creased dependency on the automobile, while in other casespublic agencies began to operate mass transit systems.Today, urban mass transportation is a public function inmost large cities, and except for railroads, mostof the private companies are small operations. The loss ofprofits and patronage in this industry as had few parallels.

The Nation began to realize that the increasingdependency on the automobile was lowering the quality oflife, especially in urban areas. Living space, energyresources, and the environment were all being adverselyaffected by the automobile. Large cities were plagued bytraffic congestion, failing commuter rail services, andhigh costs of renewing and improving transit services.

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The Congress and the executive branch realized thatthe welfare and vitality of expanding urban areas was beingjeopardized by the deterioration or inadequate provisionof urban transportation services. In 1961 tne firstFederal legislation directed at urban mass transportationimprovement was passed as part of the Housing Act of 1961(Public Law 87-70 section 303). It included funds for a longterm, low-interest loan program; grants for transportationplanning; and grants for demonstration projects. Thenin 1964, the Congress passed the Urban Mass TransportationAct (49 U.S.C. 1601) which went beyond the 1961 legislationby authorizing a new program of Federal grants for thepurchase of capital equipment in order to provide forthe development of comprehensive and coordinated masstransportation systems, boh public and private, inmetropolitan and other urban areas.

The purposes of the 1964 act are to (1) assist in thedevelopment of improved mass transportaion facilties, equip-ment, techniques and methods, with the cooperation of bothpublic ard private mass transit companies, (2) encourage theplanning and establishment of urban mass transportationsystems with the cooperation of both public and private masstransportation companies, and (3) assist State and localgovernments in financing such systems, to be operatedby public or private mass transportation companies asdetermined by local needs. Although private transit systemscan benefit from the act, they can obtain assistanceonly through contractual arrangements with public agencies,such as a public transit authority.

Section 3 of the act authorizes a capital grant programwhich provides Federal financial assistance for

-- capital grants for he acquisition, construction,reconstruction, and improvement of facilities andequipment and

-- capital loans for the advance acquisition of realproperty for future transportation use.

Capital grants may be made in an amount equal to 80percent of the net project cost--that part of the projectcost which the Federal Government determines cannot reason-ably be financed from revenues. The remainder of the prc-ject cost must be provided from other than Federal funds.Despite Federal capital funds, operating assistance remainedan unmet need. This threatened the continuation of masstransit systems throughout the country. The Congress,recognizing this, amended the Urban ass TransportationAct in November 1974 to include an operating subsidy

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program. Section 5 of the act now authorizes formulagrants for use in either mass transportation capitalor operating assistance projects.

Formula grants for capital assistance may not exceed80 percent of the net project cost. Formula grants forpayment of operating expense subsidies may not exceed50 percent of the cost of operating expense projects.

As in the section 3 program, only public agencies areeligible to receive Federal funds; private transit companiesmay benefit through contractual arrangements with the publicagencies, However, eligibility for operating assistance islimited to urbanized areas of 50,000 or more people.

Both thpe seuion 3 and section 5 programs are adminis-tered by the Urban Mass Transportation Administration (UMTA),Department of Transportation.

SCOPE OF REVIEW

More than 10 years have passed since the originalUrban Mass Transportation Act became law, and little infor-mation is available about the remaining private mass transitoperators. To obtain information about the private masstransit industry and its relationship with UMTA, we havetried to identify and contact the remaining private opera-tors. With the assistance of the American Public TransitAssociation, the United Bus Owners Association, the AmericaAutomobile Association, the Association of American Railroads,and trade magazines and books, we obtained the names of918 rivate mass transit operators that were oelieved to beoperating.

By mass transit we mean transportation service providedto the public on a regular and continuing basis. We includedthree modes of transportation in our ceview--bus, rail, andferryboat. We developed and mailed questionnaires to the 918companies identified in order to obtain general informationabout the private mass transit industry. Of the originalgroup we found that at least 236 were either out of businessor not providing mass transit service. From our reducedpool of 682 private operators--595 bus companies, 19 rail-road companies and 68 ferryboat companies--450 responded toour questionnaire.

The information gathered from the questionnaire indicatedbasic characteristics of the private mass transit companies,such as the types of service provided, size, and ridership,and the capital and operating needs of the companies. Wealso obtained information on their involvement with andopinions of UMTA.

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We discussed UMTA's policies and procedures relatingto private mass transit companies with UMTA officials atUMTA headquarters in Washington, D.C.; officials of pivateindustry associations, and selected private transit opera-tors. We reviewed legislation; and UMTA policies, proce-dures, and selected records.

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CHAPTER 2

UMTA AND PRIVATE TRANSIT COMPANIES

Most of the private mass transit companies that re-sponded to our questionnaire, excluding commuter railroads,were smuli firms, serving geographical areas of less than200,000 people, using fewer than 10 vehicles in their masstransit operations, and carrying fewer than 200,000 peoplea year. According to the American Public Transit Associa-tion, private transit operators (excluding ferryboats)carried about 560 million revenue passengers in 1975,or about 10 percent of the Nation's mass transit ridership.Without these private operators, and unless publicagencies provided such services, many people could bewithout transportation, or could turn to private automobilesand add to the congestion, pollution, and energy drain.

Most of the private mass transit companies that respondedwere not financially sound and the majority of them indicatedthat they had both capital and operating needs which theycoul; not meet from their operating revenues. Although thelegislative history of the Urban Mass Transportation Actindicated that its provisions should benefit both publicand private operators, in the past ublic transit systemshave solicicted and obtained Federal mass transit funds morethan private transit systems.

Although UMTA has not actively discouraged privateoperators from seeking grant assistance, it has not encour-

aged private operators to obtain assistance or determinedwhether such operators need help in meeting proceduralrequirements for financial assistance. Many privateoperators indicating a financial need had not applied toUMTA for assistance. Two of the primary reasons were theirdoubts about eligibility and an inability to find a publicagency to sponsor their application.

In addition to financial assistance the act also givesprotection to private operators. Section 4(a) of the actstates, in part, that no Federal financial capital or opera-ting assistance will be provided under the act to any publicbody unless a unified or coordinated urban transportationsystem program is developed which encourages, "to themaximum extent feasible," the participation of private tran-sit companies. Section 3(e) includes a provision requiringthe Secretary to find that private operators have been in-cluded "to the maximum extent feasible" in the transportationprogram before financial assistance can be given. As ofOctober 1, 1976, UMTA had lic clear policies or criteria formaking 3(e) findings and had not considered the role of

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private transit companies in isportation plans or pro-grams in making 4(a) findings.

UMTA FINANCIAL ASSISTANCE AFFECTINGPRIVATE MASS TRANSIT COMPANIES

According to the language and history of the act, UMTAis to aid private as well as public transit systems.Congressional debate indicates that the act would help savethe private mass transit industry. The Congress wanted toassure that privately owned transportation companies wouldreceive fair and equitable treatment and that only rarelywould they be bought out.

As of September 30, 1976, almost $5.7 billion had beenapproved for capital projects funded under section 3 of theact. Of 707 capital grants approved for the dtin's tran-sit systems we found that 77, or about 11 percent, assisted127 private mass transit companies--ll railroads includingthe Penn Central and Reading which merged into ConRail 1/ inApril 1976, and 116 bus companies including 56 small busowners in New Jersey. In some grants, assistance was pro-"ided for more than one private mass transit company. These77 grants have provided $725 million, or about 13 percent ofthe Federal dollars approved under section 3. Most of thisassistance went to the railroad companies as shown in thefollowing table.

Number of Amount ofompanies Federal grants

(millions)

Rail 11 $618Bus 116 107

Total 127 $725

Of these 127 private mass transit companies, 13 bus companieswere subsequently bought out by public bodies with UMTA fundsand 7 more were bought out by public bodies without UMTAfunds.

1/ConRail was created by the 1Reion&l Rail ReorganizationAct of 1973, as amended, to acquire and operate the railproperty of the seven bankrupt carriers in the Midwest andNortheast regions of the country--Penn Central, Central ofNew Jersey, Erie Lackawanna, Reading, Lehigh Valley, AnnArbor, and Lehigh and Hudson Rivers. ConRail began oper-ations on April 1, 1976.

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Of the estimated 682 private mass tansit companiesin existence, 107 have benefited from UMTA's capital grantprogram while about 30Q of the 333 public transit systemshave benefited. However, public transit companies carryabout 90 percent of the Nation's mass transit passengersand have recieved about 87 percent of the UMTA capitalgrant funds.

Major efects of the act have been to stem thedecline in mass transit ridership and to revitalize theindustry. This has been accomplished, in many instances,by public agencies with UMTA funds acquiring the assetsof private mass transit companies and modernizing thesystems. As of December 31, 1975, about 177 transit systemsin over 100 cities had been taken over by public bodies withFederal capital grant assistance of over $189 million. Asof September 30, 1976, 10 more such acquisitions, costing anadditional $11 million in Federal funds, were made, bringingthe total to 187 companies at a c3t of over $200 millionin UMTA capital grant funds.

We have not been able to determine the impact of UMTA'soperating subsidy program under section 5 on private masstransit companies. Although UMTA has a list of publicagencies receiving section 5 funds, it has not identifiedthe private mass transit companies which have receivedassistance through contractual agreements with public agen-cies. Without knowing who ultimately receives section 5funds, UMTA management does not have a basis for assessingits role in helping private t ansit companies or evaluatingthe impact of the operating subsidy program.

Recommendations and agency comme nts

We recommend that the Secretary of Transportation re-quire the Administrator of UMTA to identify the private masstransit companies that have received section 5 assistanceand the amount of such assistance.

In commenting on this report (see app.I), Departmentof Transportation officials agreed with the recommendationand stated that their reporting system, now being developed,will routinely make section 5 financial information avail-able.

CHARACTERISTICS OF PRIVATEMASS TRANSIT COMPANIES

Of the 450 private mass transit companies that respondedto our questionnaire, 390 were bus operators, 13 were railrc s,and 147 were ferryboat operators. All the companies told usthat they provided mass transit service, which we had defined

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as transportation service provided to the public on aregular and continuing basis. The primary service providedby frryboat companies was commuter boat service, while therailroad companies generally provided intercity and suburbanservice. The most common mass transit services providedby bus companies were intercity, city transit, and suburbanservice.

Many of these private mass transit services were beingprovided in small urban areas. As indicated in the follow-ing table, over 60 percent of the bus companies and 80 per-cent of the ferryboat companies served population areasof less than 200,000. This was not true of railroad com-panies, which generally served urban areas of 1 millionor more.

Population sizeof g;&.raphical Bus Railroad Ferryboat

area served companies companies companies

Less than 5.000 2% 0% 34%5,000 to 49,999 32 0 2350,000 to 199,999 27 8 23200,000 to 999,999 ?5 0 71,000,000 or more 14 92 i3

Total 100% 100% 100%

Commuter rail service operated primarily in the heavilypopulated areas of the east coast and the midwest. Themajority of private bus companies were located in theeastern part of the United States, especially in Massachu-setts, New Jersey, New York, and Pennsylvania. Comparativelyfew were located west of the Mississippi River exceptin the States of Texas, California, and Washington. Ferry-boat operations were scattered nationwide.

Because the majority of private bus and ferryboat compa-nies were providing service in small areas, the number ofmass transit passengers carried by these companies as smallc-npared to the private railroad companies who serve largerurban areas. Over 50 percent of the bus companies and over

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60 percent o the ferryboat companies transported 100,000or less passengers per year. In contrast, all the railroadcompanies transported more than 100,000 passengers. Thefollowing table shows the number of mass transit passengerscarried by our respondents in calendar year 1974.

Number of mass transit Bus Railroad Ferryboat

dassengers carried companies companies companies

Less than 50,000 34% 0% 29%50,000 to 100,000 17 0 32100,001 to 200,000 11 8 21200,001 to 500,000 12 15 13500,001 to 1,000,000 9 0 51,000,001 or more 17 77 0

Total 100% 100% 100%

The number of vehicles used also indicated the size ofthe existing private companies. Over 55 percent of the buscompanies and 75 percent of the ferryboat companies said thatthev used 10 or fewer vehicles in their mass transit service.However, the majority of railroad companies responding used51 or more railcars.

About 90 percent of the bus companies, 100 percent ofthe railroad companies, and 50 percent of the ferryboat com-panies responding said that they had capital or operatingneeds that they could not meet with their mass transit oper-ating revenue. Many private bus companies are using revenuegenerated from nonmass transit services to subsidize theirmass transit operations. Although the private ferryboat andrailroad companies were not generally providing nonmass tran-sit service, many of the private bus company respondents havetold us they were providing nonmass transit services, such ascharter, sightseeing, and school service. When taking alloperating reverues into account, 70 percent of the buscompanies, 100 percent of the railroad companies, and 24percent a. the ferryboat companies responding have indicatedthat they could not meet such mass transit needs as the fol-lowing:

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Percent ofrespondents Unmet needs

85 Replacement of oldequipment

71 Operating expenses49 Expansion of service

through equipmentacquisition

Many of these operators said that if they continue to expe-rience unmet capital operating needs they will probably in-crease fares or cut back on regular service. It is doubtfulthat these two actions will be beneficial, as they both maylead to a decrease in revenue passengers, resulting inrevenue loss and the perpetuation of unmet needs.

A large number of private operators have experiencedoperating deficits and it is anticipated that, at least forbus companies, the number will increase. The following tableshows the percent of private operators who had an operatingdeficit before taxes for 1970 through 1975 and their antici-pated financial situation for 1976.

Percent reporting operating deficitFiscal year Bus Railroad Ferryboat

1970 64 92 231971 65 92 251972 66 92 321973 69 92 191974 72 92 231975 78 100 241976 (anticipated) 79 100 23

Most respondents were experiencing operating deficits,which could result in cessation of service. About 70 per-cent of our respondents have said that there was no publictransit system serving the same area as they served, and,67 percent of this group have indicated that they anti-cipated an operating deficit in fiscal year 1976. Ifthese private operators go out of business and no publicagency provides the service, many people will have toturn to the automobile or be without transportation.

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Federal financial assistance does cover operating sub-sidies, but only for population areas of 50,000 or more.Railroad companles did not serve these small areas, butsome bus and ferryboat companies did. Although seventy per-cent of the bus companies and 12 percent of the ferryboatcompanies that served population areas of less than 50,000,anticipated ar operating deficit in fiscal year 1976, theywould not be eligible for this financial assistance.

Legislation was pending in the 94th Congress which wouldhave provided Federal grants to population areas of less than50,000 for operating subsidies. Presently, the act sets aside$500 million to finance planning or capital projects for areasof less than 50,000 people. Two bills before the Congress,S.662, which had passed the Senate, and H.R. 3155, which waspending in the House, would have authorized expenditure of$250 million of the $500 million for subsidizing operatingexpenses. However, neither bill was enacted before adjourn-ment in October 1976.

PRIVATE OPERATORS LACK A CLEARUNDERSTANDING OF UMTS PROGRAMS

Private operators do not understand UMTA's financial as-sistance programs. Although 82 percent of the respondentshad capital or operating needs that they could not meetthrough their mass transit revenues, only 10 percent had ap-plied for UMTA assistance. This low proportion of applica-tions can only be partially accounted for by a lack ofawareness of UMTA's programs. Over 70 percent of the re-spondents had heard of UMTA and almost 60 percent knew Fed-eral financial assistance was available to private operators.They had heard about this assistance primarily through Stateand local officials or through private trade asscciations.

Many private operators who were aware of UMTA's programs,lack a clear understanding of how the programs work. Manydoubted their eligibilty for assistance; others said that theywere not able to obtain a public agency to sponsor an appli-cation. The following table lists the reasons given by theseoperators for not applying to UMTA.

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Percent ofrespondents Reasons given

(note a)

39 Doubted eligibility for such assist-ance

21 Not able to get a public agency tosponsor the application

20 Had difficulty with UMTA's policiesand procedures in applying for funds

13 Did not want to get involved with theFederal Government

10 Did not want to get involved with UMTAbecause Federal capital assistance maylead to public takeover

9 Told that they were not eligible

7 Satisfied needs by State or local funds

6 Satisfied monetary needs through operat-ing revenues

6 Satisfied needs by commercial sources

5 Thought there would be problems withthe employee protection requirement inFederal law.

a/ Does not total to 100 percent because some respondentsprovided more than one reason.

One of the reasons eligibility for assistance wasdoubted may be a misconception private operators had aboutUMTA's programs. Of the respondents who knew that UMTAcould provide financial assistance to private operators,abou 45 percent thought that having an operating deficit wasa prerequisite for eligibility. The act does not state thathaving an operating deficit is a condition for receivingassistance. UMTA will provide capital grant funds to cover80 percent of the cost of a project which it determinescannot reasonably be financed from revenues.

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We made followup contacts with those respondents whoindicated that they had difficulty with UMTA's policies andprocedures. Red tape and length of time to prepare applica-tions were mentioned as problems. What was most clear, how-ever, was that private operators, lacked information aboutUMTA's policies and procedures.

We also contacted some respondents who said that theycould not find a public agency to sponsor an application.No single reason predominated; however, some of the respon-dents believed that local politics and a lack of loca'matching funds were responsible.

UMTA has not developed a list of private operators ora system to inform private operators of UMTA's financialassistance programs or of private operators' rights underthe act. UMTA does have an informal arrangement where oneofficial in UMTA's Office of Transit Management, designatedas transit industr, liaison, responds to private operators'requests for information.

Conclusions

Historically one of UMTA's primary purposes has beenthe preservation or stabilization of existing transit serv-ice. Although UMTA has given financial assistance to privatemass transit companies, its preservation of transit servicehas primarily been through providing about $200 million inFederal grant funds to assist cities in acquiring privatemass transit companies. Private mass transit companies arein financial trouble; not all private systems having finan-cial problems want to be taken over by public agencies.

At the time we developed our questionnaire, UMTA didnot know how many private transit operators there were,Thus it had no means for communicating directly with suchoperators and informing them of available assistance. IfUMTA is to help the existing private mass transit systems,it will need to make more of an effort to distribute in-formation to them.

Recommendations

We recommend that the Secretary of Transportation re-quire the Administrator of UMTA to:

-- Inform the existing private companies about the Fed-eral financial assistance programs and, where neces-sary, provide these companies with assistance inapplying for Federal mass transit grants.

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-- Identify reasons why private operators cannot finda public agency to sponsor their applications anddetermine possible remedies.

Ageny comments and our evaluation

In responding to our recommendations that UMTA informthe private companies about Federal financial assistanceprograms (see app.I), the Department of Transportationindicated that UMTA had prepared an informational brochureon UMTA programs available to assist nonurbanized areas.This brochure, dated February 1976, was distributed togroups, such as the International Taxicab Association, theNational Association of Motor Bus Owners, the AmericanPublic Transit Association, and the National School Trans-portation Association.

Department officials said that more efforts will bemade to inform private operators of UTA programs, espe-cially through their trade associations. We believe thisis a positive step, but that more direct information isneeded. Although we did not ask our questionnaire res-pondents if they belonged to the International TaxicabAssociation or the National School Transportaticn Associ-ation, we did ask about membership in the American PublicTransit Association and the National Association of MotorBus Owners. Only 48 of our 450 respondents belonged to theformer organization, and 162 belonged to the latter. Webelieve that a brochure specifically explaining UMTA'sprograms and the impact that such programs may have on pri-vate transit companies should be prepared and sent directlyto private transit companies. This would provide greaterassurance that private transit companies are informed aboutUMTA programs and their relationship to them.

Department officials stated that identifying reasonswhy private operators could not find a public agency tosponsor their applications and determining possible remedieswould be ot limited use, but said that where possible, theredsons will be identified and remedies sought. An UMTAofficial clarified this response by saying that UMTAbelieved conducting a separate study would not be very use-ful but that when such matters are brought to its attentionunder routine procedures, it would try to identify reasonsand seek remedies. Finding out why public agencies did notsponsor private operators may reveal shortcomings in presentpolicies and procedures and could provide information whichwould support changes to such policies and procedures.Further, this action, along with the policy statements and

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new procedures discussed on pages 17 through 19 would re-inforce UTA's commitment to provide assistance to privatelyowned as well as publicly owned mass transportation compan-ies.

UMTA'S POLICIES AND PROCEDURES DO NOTADEQUATELY CONSIDEr PRIVATE OPERATORS

A few respondents complained about UMTA in their gen-eral obervations about the UMTA programs, as shown in thefollowing chart.

Percent ofrespondents Complaints

9 Private operators should be able to godirectly to UMTA for aid without havingto go through public agencies

4 UMTA helps public transit operators, notprivate transit operators

4 Public transit authorities, receivingUMTA funds, are pushing private oper-ators out of business

3 UMTA is concerned with large operators,not small ones

Consequently, we looked into UMTA's policies regarding thosesections of the act which afford some protection to privatemass transit companies. The Congress was concerned aboutthe role of private transit operators in providing mass tran-sit service. While the Senate and House reports stated thatthe Federal Government should be neutral in the decisionof whether a private company or public agency operates thetransit system, debate showed that the Congress wanted assur-ances that publicly owned transportation companies would notbe favored over private mass transit companies. Amendmentswere introduced in both the Senate and the House to assurethis. One of these amendments became section 3(e) whichstates that no Federal financial assistance hall be providedunder the act to any public agency for the urpose of acquir-ing assets of a private mass transit company, or for prc. idingservice which is competitive or supplementary to the serviceprovided by an existing mass transportation company unless

-- the Secretary of Transportation finds that such as-sistance is essential to a program for a unified orofficially coordinated urban transportation system;

15

--the Secretary of Transportation finds that such aprogram, to the maximum extent feasible, provides forthe participation of private mass transportation com-panies;

-- just and adequate compensation will be paid to pri-vate mass transit companies for their franchises orproperty to the extent required by applicable Stateir local laws; and

-- the Secretary of Labor certifies that such assistancecomplies with 13(c) of the act which requires, as acondition of UMTA assistance, that fair and equitablearrangements be made to protect the interests of em-ployees affected by such assistance.

Another amendment was included in section 4(a) whichstates in part, that no Federal financial assistance shallbe provided under section 3 unless the Secretary determinesthat the facilities and equipment, for which assistance issought, are needed to carryout a program for a unified orofficially coordinated urban transportation system. Such aprogram shall encourage, to the maximum extent feasible, theparticipation of private enterprise. UMTA's Office of Plan-ning Assistance evalutes the process which results in trans-portation plans and programs and annually certifies that theymeet section 4(a) requirements.

UMTA officials have disagreed over the interpretationof 3(e) and have had difficulty interpreting the phrase "tothe maximum extent feasible." UMTA has had no clear policiesor criteria for making 3(e) findings, and in the past, find-ings have not been made for all grant applications. Whenfindings are made, UMTA staff rel'-e on information providedin the application, which includes _ description of masstransit service provided in an applicant's area, publichearings, site visits reports, and a planning evaluation andcertification provided by UMTA's Office of Planning Assist-ance. No input is required of private operators who mightbe affected.

The planning evaluations and certification required bysection 4(a) of the ct and used by UMTA to help make 3(e)determinations did not refer to private operators, and therehave not been adequate provisions for including private op-erators in transportation plans and programs. UMTA's Officeof Planning Assistance considered he inclusion of privateoperators a low-priority issue. According to UMTA officials,no real determination was made of whether private operators

16

were included to the maximum extent feasible in plans orprograms. UMTA guidelines explaining how to comply withsection 4(a) did not mention private operators except tostate that private interests should be represented on tech-nical or advisory committees or in other appropriate ways.We conducted telephone interviews with those private oper-ators who indicated in the questionnaire that they neededfinancial assistance but could not find a public sponsor orhad trouble with UMTA's policies and procedures. About halfof those interviewed told us that, while they were awareof an urban transportation program for their area, theywere not involved in either developing the pro-ram or servingon an advisory committee.

Historically, UMTA has not considered the role of pri-vate transit operators to be important. UMTA oicials havesaid that most private operators wanted to go out of businessbecause they could not make a profit. Thus, determiningwhether private operators had been included t the maximumexteit feasible in transportation plans or programs for anarea was viewed as a moot issue. Further, UMTA has viewedthe decision to operate a transit service by a publicauthority rather than by a private operator as a localdecision. However, UMTA officials have said that they havean unwritten policy of encouraging public transit authoritiesto cooperate with private operators, including acceptance oftransfers between the two systems and refraining from under-cutting fares. Although UMTA does not have the authorityto require a public entity to purchase the asets of aprivate company which is going out of business, it encouragespublic authorities to purchase the assets rather than simplyletting the private ompany end operations one day, whilethe public system scrts a new operation the next day.

UMTA officials have told us that their policy towardsprirate operators is changing because UMTA has become con-ce-ned about the private industry, including paratransitoperators, sch as taxicabs. UMTA's Associate Administratorfor Policy and Program Development has stated that, whileUMTA believes the issues of what service is provided and who4s best qua] fied to provide it are matters of local cncern,it will review programs and individual applications to nsure that private operators have been given sufficient oppor-tunity to participate in any arrangements for the provisionof service.

The Associate Administrator said in a January 1976 speechthat "subsidizing publicly owned companies in * * * communitiesin direct competition with private operators would be awasteful and disruptive action resulting in ruinous com-petition from which no one would benefit." However, UMTA

17

officials said that they would not necessarily refuse togrant funds to an applicant simply because there wascompetitive or supplemental service to a private operator'sservice. UMTA officials stated that a 3(e) finding becomesmo t important when there is competitive or supplementalservice because UMTA wants to be certain that private oper-ators have been given the opportunity to participate in tran-sit operations. If UMTA is assured of this and feels thatprivate operator participation is still not feasible, it willaward the grant.

According to UMTA officials, a 3(e) finding is now in-cluded in every grant approval. We checked 23 grants thathave been awarded during the first 5 months of calendar year1976 and found that while there was a 3e) finding in everygrant file, it was simply a standard statement that thereis adequate justification that the transportation program,"to the maximum extent feasible," provides for the partic-ipation of private mass transportation companies. We couldfind no documentation unique to each grant which would just-ify the 3(e) findings mde.

UMTA is presently writing a new external operating manualto be used as an applicant's handbook for preparing section3 and 5 grant applications. The draft of the new manualstates that as a condition for UMTA funding of sections 3 and5 projects, the applicant must meet the planning and program-ing requirements of the act, and the requirements of jointUMTA-Federal Highway Administration planning and programingregulations issued in September 1975. Under these new re-gulations an urbanized area, through a Metropolitan PlanningOrganization (MPO)i/ must develop a transportation plan.UMTA makes an annual certification of compliance with section4(a) of the act based on an urban area's planning process.This certification is required before an area can be eligiblefor UMTA funds. The joint regulations stipulate that "theurban transportation planning process shall include consid-eration of existing private mass transportation services."Projects anticipated for the next 3 to 5 years must be in-cluded in a transportation improvement program for the ur-banized area.

According to the head of the task force which was de-veloping the manual and one of UMTA's Assistant Chief

1/ The MPO is an organization designated by the Governor ofa State for developing transportation plans and programsin a given geographical area. The principal electedofficials of the local governments within an MPO's juris-diction should be represented.

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Counsels, the tlew procedures will better provide for theprotection and .nclusion of private operators in transporta-tion plans and programs. Under the new procedures UMTA willrequire certain documents from the MPO; one of these documentsis an analysis in relation to section 3(e) of the act. MPOswill have to determine if private operators can meet all orany of he transportation needs set forth in the grant appli-cation. If private operators are not to be included in atransportation plan or program, POs will have to give specificreasons explaining their exclusion. Private operators areto be identified and given written notice of public hearingsdurina which the transportation improvement program will beavailable for review.

We noted, however, that neither the aforementionedsection 3(e) analysis by the MPO nor the private operator'sreceipt of written notice of public hearings are in theproposed external operating manual. The proposed draft doessay that a project application must contain assurances thatthe applicant's program either provides for or encouragesparticipation of private mass transportation companies tothe maximum extent feasible. However, the draft manual doesnot describe the information needed to make these assurances.

Staff from the Office of Planning Assistance told usthat, as yet, there ae no internal guidelines telling UMTAplanning staff to look for section 3(e) issues in transpor-tation plans and programs or specifying that written noticeof public hearings will be required. However, these offi-cials told us that the annual certification of compliancewith section 4(a) is the point at which UMTA should find outif private operators have been considered.

Conclusions

Although there is a growing concern for private masstransit companies among UMTA officials, they have not issuedany guidelines or policies to potential planners and appli-cants concerning adequate procedures and documentation toshow that private mass transit companies have been includedin the planned transit operations. Potential planners orapplicants are not required to ask private operators howproposed transportation plans and programs will affect them;and UMTA has not sought the input of private operators. Also,a section 3e) finding written by UMTA staff in standardizedlanguage wi hout specific documentation does not provide UMTAmanagement with information on how it was determined that pri-vate operators have been included to the maximum extent fea-sible. Without criteria explaining what constitutes such find-ings, it is not clear what documentation would be sufficient.

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If UMTA is to insure that private operators are givenadequate consideration as set forth in the act, it needs tosolicit and consider the views of private operators to deter-mine the impact that proposed transportation plans and pro-grams will have on their operations. Also, UMTA needs toclarify what constitutes adequate consideration of privateoperators.

Recommendations

We recommend that the Secretary of Transportation re-quire the Administrator of UMTA to:

-- Establish written criteria on which 3(e) findings areto be based and require documentation in grant filessupporting UMTA's 3(e) findings in accordance withestablished criteria.

-- Include in the new external operating manual, in-structions to potential applicants on the type ofinformation needed to show that private operatorshave been included to the maximum extent feasible.The criteria UMTA uses to make 3(e) findings and arequirement that private operators be identified andgiven written notice of public hearings for grant ap-plications should be incorporated in these instruc-tions.

--Include in the new external operating manual, a re-quirement that the MPO perform a 3(e) analysis whichwould include written comments by private operatorson what impact the transportation plan or programwill have on them, and attach this analysis to itstransportation improvement program.

--Issue internal instructions requiring UMTA planningstaff to consider section 3(e) and 4(a) issues whenmaking annual certifications and evaluations of thetransportation planning process.

Agency comments and our evaluation

The Department of Transportation said that rules proposedfor publication in the Fedtral Register will implement sec-tions 3(e) and 4(a) of the act. (See app. I.) They willset forth requirements and procedures for applicants applyingfor planning, capital, or operating funds so that UMTA canmake a 3(e) finding with all available documentation. As ofOctober 12, 1976, UMTA's proposed rules for implementing 3(e)and 4(a) were still being drafted by the Chief Counsel'soffice and had not been circulated for initial review andcomment by other UMTA offices.

20

Further, the Department said that the new external op-erating manual will require that evidence to support UMTA3(e) findings be included in the transportation improve-ment program. Also, UMTA said that private operators willhave the opportunity to address the urban transportationprogram as part of the public hearing process.

UMTA is taking action to improve consideration of pri-vate mass transit companies; however, we believe that mcreshould be done. The most recent draft of the externaloperating manual, which UMTA plans to implement as of De-cember 15, 1976, does not incorporate te criteria used tomake 3(e) findings, nor does it require that private oper-ators be identified and given written notice of publichearings.

UMTA has recognized the need for written internal in-structions regarding 3(e) and 4(a) issues and has said thatthese will be issued when the external operating manual andproposed rules re completed. They have not, as yet, re-quired that documentation supporting 3(e) findings be ingrant files. We believe it is important that the recordsclearly explain the rationale behind these findings and thatUMTA staff know what the criteria is to make them.

Although UMTA officials have expressed concern throughspeeches and policy statements regarding private paratransitoperations, such as taxicab operations, it is not clearwhether this concern includes all privately owned mass trans-por-ation companies. We believe that UMTA should explicitlyinclude private operators engaged in mass transit service aswell as private paratransit operators in its policies andprocedures.

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APPENDIX I APPENDIX I

OFFICE OF THE SECRETARY OF TRANSPORTATION

WASHIr3:TON, D.C. 20590

ASSISTANT SECRETARYFOR ADMINISTRATION

October 1, 1976

Mr. Henry EschwegeDirectorCommunity and Economic Development DivisionU. S. General Accounting oUficeWashington, D. C. 20548

Dear Mr. Eschwege:

This is in response to your letter of August 2, 1976, requestingcomments from the Department of Transportation on the GeneralAccounting Office draft report entitled, "Need for Greater Assurancethat Adequate Consideration is Given to Private Mass Transit Com-panies in Federal Mass Transportation Programs." We have reviewed thereport in detail and prepared a Department of Transportation reply.

Two copies of the reply are enclosed.

Sincerely,

William S. Heffeifinger

Enclosures

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APPENDIX I APPENDIX I

I. Title: Need for Greater Assurance that Adequate Considerationis Given to Private Mass Transit Companies in FederalMass Transportation Programs

II. GAO Findings and Recomendatons:

The GAO conducted a survey of the private mass transit industry anda review of the relationship of these private operators with IJMTA.The GAO accomplished the above by distributing a questionnaire toprivate operators identified by the American Public Transit Association,the United Bus Owners Association, the American Automobile Association,the Association of American Railroads, and trade magazines and books;by interviewing selected private operators and UMTA officials; and byreviewing applicable legislation, UMTA policies and procedures andUMTA records.

The information gathered from the GAO uestionnaire gave basiccharacteristics of private mass transportation companies, as well as privateoperators' involvement with, and opinions of, UMTA.

Based upon its review, GAO has reccnmended that the Secretary requireUMTA to:

1) Identify the private mass transit companies thathave received Section 5 assistance and the amount ofsuch assistance.

2) Inform existing private companies about the Federalfinancial assistance programs and, where necessary,provide these companies with assistance in applyingfor Federal mass transit grants.

3) Identify reasons why private operators cannot finda public agency to sponsor their applications andidentify possible remedies.

4) Establish written criteria on which 3(e) findingsare to be based and require documentation in grantfiles supporting UMTA's 3(e) findings in accordancewith established criteria.

5) Include in the new external operating manual, instructionsto potential applicants on the type of informationneeded to show that private operators have been includedto the maximum extent feasible. Incorporated in theseinstructions would be the criteria UMTA uses to make 3(e)findings and a requirement that private operators beidentified and 9'Ve specific written notice of publichearings for g:'. , pplications.

23

APPENDIX I APPENDIX I

6) Include in the new external operating manual arequirement that the Metropolitan Planning Organizationperform a 3(e) analysis which would include writtercomments by private operators on what impact, if any,the transportation plan or program will have on them, andprovide this analysis as an attachment to its transportationimprovement program.

7) Issue internal instructions requiring UMTA planning staffto consider section 3(e) and 4(a) issues when making annualcertifications and evaluations of transportation plansand programs.

III. DOT Comments on Findings and ecomme;,dations:

The GAO study made a number of recommendations relating to UMTA'srelationship with private mass transit operators. GAO observationson this subject are generally constructive, and in line with currentor proposed UMTA procedures.

UMTA has recognized the need for better opportunities for privateoperator involvement in local transportation programs, and recent UMTAactivities strengthen that involvement. It has become clear that asmany basic public transportation systems have stabilized, Federal, Stateand lucal interests have expanded to more actively include community'-level services within small areas, rural communities and suburban fringesas well as special transportation services for elderly and handicappedpersons. Private transportation operators may be well-suited to providemany of these services.

Specific UMTA initiatives designed to increase the participation of private-nterprise in local transportation programs and in receiving the benefits

Federal assistance include:

i. the development of proposed regulations for the equitableimplerientation and effective administration of Section 3(e)and 4(a) of the Urban Mass Transportation Act of 1964, asamended.

2. the development of in UMTA paratransit policy, the basesof which are:

a. Non-support of public or nonprofit organizationsin competition with private operators when suchoperators are willing and able to providethese services in a economic manner;

h private operator representation at,r involuveentin the planning and programming process; and

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APPENDIX I APPENDIX I

c. private enterprise's opportunity to bid fornew paratransit services.

3. the strengthening of the Section 16(b)(2) proceduresto include the notification and/or sign-off of privateas well as public operators on services proposed byprivate nonprofit organizatiors, and the participationof private operators n the development of thetransportation program.

4. the strengthening of internal procedures for addressingcomplaints of private enterprise under 3(e) or 4(a).

5. ongoing research activities to identify private trans-portation resources in non-urbanized areas. (UMTA wouldwelcome the opportunity to receive the GAO list of pri-vate mass transportation carriers in order to furtherthese research activities).

6. activities with private operators in our Service andMethods Demonstration Program as means of showingcommunities how to integrate and better utilize privatetransportation carriers.

7. The implementation of UTA policy not to fund either newor replacement bus benches where private enterprise iswilling and able to fund such equipment.

8. requirement as a condition o an UMTA capital assistancegrant to the Delaware Authority for Specialized Transportation(DAST) that a formal agreement be reached between the publicagency (DAST) and private taxicab operators for the contrac-ting of certain services to the taxi operators.

9. the publication of Charter and School Bus reguations designed.o ensure adequate protection for private transportationoperators providing these services.

UMTA believes these initiatives reflect our concern for the participation. of privateenterprise in urban mass transportation, yet do not violate statutory requirementsprecluding direct UMTA assistance to private transit operators.

UMTA identify all private mass transit comp anies receivingSection 5 assistance and the amount o suc assistance

UMTA agrees with this recommendation. UMTA onQoinq research will identifvall mass transportation companies in urbanized areas and the UMTA reportihqsystem, now under design pursuant to Section 15 of the Act, will routinelymake Section 5 financial information available.

25

APPENDIX I APPENDIX I

Inform the existing private companies about the Federalfinancial assistance programs and here necessary providethese companies with assistance in applying or ederal grants

UMTA agrees that it is important for all potential applicants to be informed ofthe policies and procedures appropriate to the various UMTA programs. UMTA hasmade efforts to keep public and private mass transit operators informed throughpress releases, presentations, and notification to transit industry organizations,State and local transportation planners, and public and private operators. As anexample, UMTA prepared an informational brochure on U'MT. programs to assistnon-urbanized areas. This brochure was widely disseminated to public interestgroups including the International Taxicab Association, the National Associationof Motor Bus Owners, the American Public Transit Association and the NationalSchool Transportation Association. More efforts will be made to inform privateoperators of UMTA payments, especially through their trade associations.

With regard to assisting private operators as they apply for UMTA grants, UMTAhas and will continue to assist applicants in the preparation of applications.This assistance, provided to public and private operators, includes a copy of theExternal Operating Manual, information on current UMTA activity in the urban area,who at the local level should be contacted for additional information, and basicinformation on UMTA's statutory and administrative requirements. Normally,assistance in a specific grant request is provided to the public agency assponsoring authority, and with whom UMTA will have a contractual arrangement.

Identify reasons why private operators cannot finda public agency to sponsor their applications and identifypossible remedies.

UMTA believes this suggestion to be of limited usefulness. If the purpose ofidentifying private operators who cannot find public agency sponsors is tofoster greater involvement of those operators in the planning and provisionsof transit service, UMTA believes that its current approach is preferable; i.e.,to inform public and private organizations through regulation and instructionalmanuals which specify efforts necessary to achieve maximum feasible participationof private operators. Where possible, the reasons for lack of public agencysponsorship will be identified and remedies sought.

Establish written criteria on which 3(el findingsare to be based and r equire documentation in grantfiles supporting UMTA's (e) indings in accordancewith established criteria

The proposed rules for implementation of Section 3(e) and 4(a) will set forthrequirements and procedures for applicants for planning, capital or operatingfunds to follow so that UMTA can make a 3(e) finding with all availabledocumt,:#ation.

26

APPENDIX I APPENDIX I

Include in the new external oeratn manulnstrucfo ta a a cnts on te troe ofTiormation needed to show that rivate operators hvebeen-nTEi-de to the maximum exte" feasible. Incorporatedin these instructions woud be the cri tar ITA uses tofake 3eJfindngs an a treurieint that private operators6i-identfied and given specific written notice of Dublichearings for grant appiicau-.

Include in the new external o erating manual requirementthat the Metrop______olitan l a eanalysts which would includecwritten comments by privateoperators on wat the transortation planor program will have on them- and rovTdethis analJyss asan ttaimeFnt to _ i transportaton mprovement program.

The new external operating manual will require that evidence to support anUMTA 3(e) finding be included in the Transportation Improvement Program (TIP).The Metropolitan Planning Organization (MPO) must describe, in some detail,the ma ner in which the participation of private mass transportation companieswith re pect to t;he program was considered, and how each separate applicationfor Fe(aral financial assistance is a part of that program. The analysis enddocunwntation from the MPO will be used to support an annual certification byUMTA f compliance with 3(e) requirements in the urbanized area.

In addition to a description and analysis of 3(e) efforts in the TIP, privateoperators have the opportunity to address specific elements of the overallurban transportation program for the area as part of the public hearingprocess called for under UMTA procedures.

The proposed rules for 3(e) will include requirements and describe procedures tobe followed by applicants, MPO's, private operators, and UMTA in the implementationof 3(e) and 4(a). Special requirements and procedures will also be developedto support UMTA's 3(e) and 4(a) fundings for non-urbanized areas.

Issue internal instructions which require UMTA planningstaff to consider section 3Tead 4Ta issues whenmakin annual cet fi-Fcio te ns and ev-Tvuat a ion oftransportation plans ndroams.

UMTA recognizes the need for written internal instructions and will promulgatesuch when the external operating manual and proposed rules are complete. In theinterim, UMTA will stress that full consideration be given private mass transpor-tation companies in the review of all UMTA grants.

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APPENDIX II APPENDIX II

PRINCIPAL OFFICIALS

RESPONSIBLE FOR ADMINISTERING

ACTIVITIES DISCUSSED IN THIS REPORT

Tenure of officeFrom To

DEPARTMENT OF TRANSPORTATION

SECRETARY OF TRANSPORTATION:William T. Coleman, Jr. Mar. 1975 PresentJohn W. Barnum (acting) Feb. 1975 Mar. 1975Claude S. Brinegar Feb. 1973 Feb. 1975John A. Volpe Jan. 1969 Feb. 1973

ADMINISTRATOR, URBAN MASSTRANSPORTATION ADMINISTRATION:

Robert E. Patricelli Aug. 1975 PresentJudith T. Connor (acting) July 1975 Aug. 1975Frank C. Herringer Feb. 1973 July 1975Carlos C. Villarreal Apr. 1969 Feb. 1973

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