The MT Position

Posted by Christopher L. Rissetto, Marc A. Goldich and Michael C. Falk, Attorneys with Reed Smith, LLP, and Steven a. Diaz, Esquire.

The Indianapolis 500. The Kentucky Derby. The US Olympic Track & Field Trials. The Bucky Bus used for football Sunday’s in Madison, Wisconsin. State Fairs. These are just a few of the hundreds of events that have used public transit buses to ferry people to and from event sites. To comply with the Federal Transit Administration’s new Rule on Charter Service that went into effect April 30, these services must now be opened to private charter bus companies for competitive bidding.

The new FTA Charter Service Rule was created to protect private charter bus companies from competition with federally-subsidized public transit systems. And the competition is steep: Up to 80 percent of public transit agencies’ eligible program costs are subsidized by the federal government.

Below are some observations regarding the impact of the new Rule:

Public Service Providers Can Ask for Exceptions to the Rule: If you are a public operator, there are opportunities for you to continue providing buses to public events, but you must ask the FTA for an exception under the new rule. Many public operators are already seeking advisory opinions and petitions for exceptions. In fact, there were close to a dozen requests for advisory opinions before the rule even went into effect. To date, the FTA Chief Counsel has issued five advisory opinions and one supplemental advisory opinion. We anticipate a significant increase in this activity now that the rule has gone into effect.

Private Charter Registration Protections – Leveling the Playing Field: If you are a private charter operator, you must register with the FTA to be eligible to receive the many protections and benefits now afforded to you under the new rule. These protections and benefits include the right to seek FTA advisory opinions and request cease-and-desist orders. Also, once you register, you will receive notice of new opportunities from public operators seeking to provide the services in your area. However, be careful: if you post incomplete or inaccurate information during the registration process you can be excluded or removed from the Web site. Removal may last as long as three years, during which time you will not receive notice of opportunities disseminated by public operators.

New Matrix Provides Guidance on Level of Sanctions for Violations of the Rule: The FTA can penalize public operators for non-compliance in several ways, including suspension and termination of grant assistance. With the substantial level of federal grant support, there is good reason for public operators to follow the rules. Under the old rule, punishment for a violation was discretionary and funding was only withheld on an “all or nothing” basis. Now, the FTA’s view appears to be that federal financial assistance must be withheld if a pattern of violations is found. The FTA has developed a matrix of sanctions it may use to determine the amount of federal funds that can be withheld, based on the severity of the violation. The FTA has also hinted that a single violation might justify a penalty. No one knows how the new rule will be implemented or the extent to which penalties will be levied to enforce it. Given this risk of grant loss, many public operators are understandably on edge.

Labor Agreements Might Conflict With Implementation of the New Rule: Compliance with labor agreements may be impacted by the new rule. For instance, in a request for an advisory opinion by the Kansas City Area Transportation Authority (“KCATA”), a potential conflict with the labor protection provision of Section 13(c) of the Federal Transit Act was highlighted because services that had been previously provided under an existing labor agreement might now be barred under the new rule. The FTA’s advisory opinion responded that “KCATA cannot be forced to carry out contractual provisions that are not in accordance with the law.” Such conflicts will continue to arise and public operators must scrutinize all aspects of their operations to determine if compliance with the new rule will raise such an issue.

Public and private charter service operators must be aware of the many elements of the new rule, including a new and more formal complaint process. It is also important to realize that the anticipated reauthorization in 2010 of SAFETEA-LU (2005) could further impact charter service opportunities.

If you have questions or would like a copy of a bulletin on the FTA’s new Rule on Charter Service, please contact one of the authors: Christopher L. Rissetto, (crissetto@reedsmith.com) is a partner in the Reed Smith Washington, DC office, and heads the Firm’s Grants & Infrastructure practice. Marc A. Goldich (mgoldich@reedsmith.com) and Michael C. Falk (mfalk@reedsmith.com) are litigation attorneys in the Philadelphia office of Reed Smith, and are members of the Firm’s transit team. Steven A. Diaz (sdiaz@diazlaw.net) was formerly Chief Counsel for the FTA. Mr. Diaz has a law office in Washington, DC, and represents private and public transit operators.

This entry was posted on Friday, May 9th, 2008 at 8:27 am and is filed under Transit Talk. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.