Hearings

In the case of D.C. Transit, a proposed bill presently pending before the House provides a direct $3 million subsidy to the company.

The Chairman of the Transit Commission has in his recent construction of the financial affairs of D.C. Transit provided a subsidy that will guarantee the bus company a profit no matter how many riders he carries or how inefficiently he operates the company. Indeed, the one single act of this Congress that will make the sale of the company possible is the denial of the subsidy of the company's profit.

Three years ago for the first time a major subsidy was introduced allowing the Transit Commission to crank in as much money as they wanted out of the D.C. Treasury to subsidize Mr. Chalk's operation.

By permitting Mr. Chalk a $3 million subsidy, the Commission is for all practical purposes requiring the City to make the equivalent of a ten-cent increase in the real estate tax or, alternatively, to require that the Congress of the United States increase the federal payment by $3 million.

I think that, allowing the Transit Commission this open-ended device of setting the school bus fare at ten cents and the regular fare at 40, and multiplying that by the approximately nine or ten million rides a year that qualify for this subsidy, has the same effect as permitting the Transit Commission just to appropriate out of the District Treasury enough money to make Mr. Chalk's operation profitable.

RECOMMENDATIONS

I would recommend that this committee and the Congress take two important actions for the benefit of the metropolitan area. One should be legislation which is in the first paragraph of the section you are dealing with today, setting the school fare at no more than ten cents. The present legislation, the present statute of the District of Columbia, permits the school fare to be 50 percent of the regular fare. This was an adequate provision three or four years ago when the bus fare was down around 20 cents or 25 cents, but now that the fare has gone up to 40 cents, this gives the Transit Commission the power to raise the school fare to 20 cents or indeed 50 percent of whatever higher fare may be set.

The Congress could, at the same time that it is acting on this bill, set the school fare at no more than ten cents.

Secondly, I believe that the Congress should deny the continuation of the bus subsidy.

It is quite true that the company should be publicly-owned. When the company is publicly-owned, it ought to be subsidized so that fares can be kept low. This is only good business for the city because the failure to serve large numbers of people with mass transportation only makes additional vast expenses for the government.

I feel that while D.C. Transit is a private profit-making company, it should not continue to be propped up by public subsidy out of the City Treasury.

Mr. Chairman, the City Council, in dealing with the budget, acted to deny any funds for recommending to the Congress for any funds beyond the August termination date of the present bill, and that action was sustained and is presently the City's position.

The subsidy which did not exist in its present form three years ago has risen from a subsidy which was relatively a small amount of money only three years ago to where you are talking about $3 million this year. I think that if rise in revenue has to take place for the bus company, that it should not come out of the Treasury of the District of Columbia. I don't see any justification for either a $3 million increase in the federal payment or a ten cent increase in the real estate tax to justify this payment to D.C. Transit.

Thank you, Mr. Chairman. I appreciate this opportunity to appear and I will be glad to answer any questions.

(The prepared statement of Mr. Hahn follows:)

STATEMENT BY CITY COUNCIL CHAIRMAN GILBERT HAHN, JR.

Mr. Chairman: It has become apparent now not only to the District of Columbia but to the entire Metropolitan Washington community that the bus systems in the metropolitan area must be publicly owned and operated by the Transit Authority as part of an integrated mass transportation system with the subway.

As is apparent from recent evidence, all of the major areas in the Metropolitan Washington Area except the District of Columbia have acted with respect to amendment of the WMATA charter to provide for purchase of the bus companies. The Virginia legislature has already acted to pass the necessary legislation to amend the charter and in April the Maryland legislature has acted in the same way.

On April 12th, 1971, the Chairman of the Metropolitan Washington Council of Governments announced that he would present a resolution to the next Council of Governments' meeting, supporting the immediate acquisition of the bus companies by WMATA and the indication was that this resolution would be unanimously supported.

From all this, it is apparent there is near unanimity among the three million residents of the metropolitan area and their political representatives that this action should take place.

Therefore, it is equally apparent that actions by the Congress ought to be taken for the early acquisition of the company.

It is equally obvious that the Congress should not take actions which would prolong the private operation of D.C. Transit and the other bus companies in the

area.

In the case of D.C. Transit, a proposed bill presently pending before the House provides a direct $3 million subsidy to the company.

Mr. Avery has so constructed the financial affairs of D.C. Transit that the subsidy (called by a misnomer a school fare subsidy) will always guarantee Mr. Chalk a profit no matter how many riders he carries or how inefficiently he operates the company.

Indeed, the one single act of this Congress that will make the sale of the company possible is the denial of the subsidy of Mr. Chalk's profit.

Who among us who have been in business would not like to operate any business where the government will constantly pay us enough money to measure the difference between our expenses and a profit.

If I were Mr. Chalk, I would be very happy to go on operating this company forever, being guaranteed my profit and I would never wish to sell.

Three years ago, for the first time, a major subsidy was introduced allowing the Transit Commission to crank in as much money as they want out of the D.C. Treasury to subsidize Mr. Chalk's operation.

By permitting Mr. Chalk a $3 million subsidy, Mr. Avery and his Transit Commission are, for all practical purposes, requiring the City to make the equivalent of a 10¢ increase in the real estate tax.

We recommend that the Congress take two important actions for the benefit of the Metropolitan Area.

One should be legislation setting the school fare at no more than 10¢, and second should be denying the continuation of the bus subsidy.

It is quite true that the bus company should be publicly owned as the legislatures of Maryland and Virginia have already agreed. When the bus company is publicly owned, it ought to be subsidized so that the fares can be kept low.

This is only good business because the failure to serve large numbers of people with mass transportation only makes additional vast expenses for the government. But while D.C. Transit is a private profit-making company, it should not continue to be propped up by public subsidy out of the City Treasury.

Mr. Dowdy. Mr. Fraser?

BACKGROUND

Mr. FRASER. You say three years ago we changed the form of the subsidy?

Mr. HAHN. Yes. Three years ago the bill you have in front of you did not exist. That was the first time there was a provision requiring the payment to bus companies of the difference between the school fare and the total fare. Before that time there was a much more complicated provision the provided a subsidy, I believe upon the justification by the bus company that this subsidy-that it, the difference between the school fare and the regular fare-resulted in some kind of a loss that was related to it, but the net effect of it was that we were talking about an amount of money around $100,000.

Since that time we have gone to a million and then two million and now three million dollars is estimated for fiscal 1972.

Mr. FRASER. Who made that determination, the Transit Commission? Mr. HAHN. Once the bill was passed, all the Transit Company has to do is to submit the number of school bus tickets they have and present a bill for payment.

Indeed, that is done monthly by the City, whether Congress appropriates the money for it or not.

Mr. FRASER. Under the old system did the Transit Commission decide what the added cost there was to the Transit System for carrying school children? Who made the determination that resulted in $100,000 a year?

Mr. HAHN. I am sorry I don't have the statute before me, but there was a certification by the Transit Commission and I believe it was the difference between what their projected earnings were and what they actually earned. Up until three years ago the practical effect of the difference in the school fare and the regular fare was that for all practical purposes that was a part of the obligation of having the franchise to run the bus company. That was picked up as a part of the cost of operating the franchise.

I believe that a certification was made by the Transit Commission to the City and it would be 50, 100, 200 thousand dollars based upon this complicated certification and appropriations request would be made for the funds.

Three years ago we went to this new system with an entirely different set of results where you are talking about almost ten million rides and you are now talking about a thirty cents difference between the school fare and the regular fare, and in which the Transit Commission in its last order, raising the fare from 32 cents to 40 cents, actually discussed in that order-it was virtually depending upon this 2.5 or 3 million dollar subsidy to provide the difference between the operating expenses of the company and a profit for the com

pany; that, if it didn't have this subsidy-it said in so many words that it would have to have provided a higher general fare.

PUBLIC ACQUISITION OF BUS COMPANY

Mr. FRASER. Your basic idea is that the bus company ought to be taken over?

Mr. HAHN. I think the bus company should be taken over. All the work we have to do from time to time in connection with the subwaymass transit problems indicates that the way the City can operate best and have mass transportation of its citizens is to have a bus company that is combined together with the transit authority to make both of them successful, and this is what that amendment to the Authority provides. Now that the Virginia and Maryland Legislatures have both passed them, it seems to me time for the District of Columbia to do so and since I would hope that would be imminent, I would consider that the continuation of this subsidy for another three years would interfere

Mr. FRASER. How would that interfere?

Mr. HAHN. Because I think it is going to be more difficult to acquire a company when it is being indefinitely propped up by a subsidy that for all practical purposes guarantees it an operating profit out of the City Treasury, or the Congressional Treasury.

Mr. FRASER. Without the subsidy, wouldn't they apply for a higher fare?

Mr. HAHN. Yes, sir.

Mr. FRASER. Would they be entitled to one under the formulas that are accepted by the Transit Commission?

Mr. HAHN. Under the rulings as set down by the present commission, yes. In my opinion it ought not. The case on that is still pending in the Court of Appeals.

Mr. FRASER. What we are faced with is a question of public subsidy or higher fares. Your view is that if there is going to be a subsidy, there ought to be public ownership?

Mr. HAHN. Yes.

Mr. FRASER. But you think there should be public ownership for other reasons as well?

Mr. HAHN. Yes.

Mr. FRASER. Under the law authorizing the subway system, are they required to contract out the operations to the private company? Mr. HAHN. Yes, sir.

Mr. FRASER. Even if there were a take-over of the bus company, we are not talking about public operation

Mr. HAHN. I am sorry. Did you ask me "contract out" about the subway?

Mr. FRASER. That is right.

Mr. HAHN. The subway at the present time is to be contracted out, yes.

Mr. FRASER. Taking the further step that if the bus system is acquired by public authority, presumably the operation of that would be contracted out to the same operator?

Mr. HAHN. Not necessarily.

It is quite true that the bus company should be publicly owned as the legislatures of Maryland and Virginia have already agreed. When the bus company is publicly owned, it ought to be subsidized so that the fares can be kept low.

This is only good business because the failure to serve large numbers of people with mass transportation only makes additional vast expenses for the government. But while D.C. Transit is a private profit-making company, it should not continue to be propped up by public subsidy out of the City Treasury.

Mr. DOWDY. Mr. Fraser?