SENATOR ANDREWS: What impact, if any, have the proposed budget cutbacks had on your plans for conducting triennial reviews?

ANSWER: Our plans for conducting triennial reviews have not changed. We intend to continue to simplify grant approval procedures, including greater involvement of the states in allocating formula funds among smaller urbanized areas, thereby reducing the caseload of direct grants made by UMTA. Also the program of projects concept now permiting one application where many were previously required. We may also consider an automated application process. These measures will reduce the grant-making burden and should still permit us to handle the triennial review work with a reduced staff. It will be necessary to review headquarters and regional office roles for this function, as well as for others, and possibly to consider contractual services and reimbursible agreements for some functions in order to have non-transferable functions such as the triennial review performed by the reduced staff.

OFFICE OF PRIVATE SECTOR INITIATIVES

SENATOR ANDREWS: Recently UMTA formed the Office of Private Sector Initiatives to provide focus and leadership in UMTA's efforts to expand the role and responsibility of the private sector in providing cost-effective public transportation. How many people are in this office?

ANSWER: Three professional and one support employees,

assigned from the existing personnel complement.

SENATOR ANDREWS: What is the budget from FY 1986 for this office staffing and personnel versus non-personnel costs? ANSWER: The Office of Private Sector Initiatives is comprised of four positions: three professional and one secretarial. Personnel and non-personnel costs are not broken out at this time.

SENATOR ANDREWS: What types of involvement does UMTA expect that the private sector will have in mass transit?

ANSWER: We expect to see private sector involvement in transit in three basic areas. Private operators will seek out types of service, such as commuter bus, which they can provide at a profit. Other private service will be under contract to a community at a lower rate of subsidy. Experience in many communities has shown that low density, week-end, and demand-response types of service readily lend themselves to private provision.

Businesses and employers are increasingly focusing on the demand for transit. Ridersharing programs, parking policies, specialized subsidies, transit planning, political support for agreed upon strategies, are examples of some of the activities being undertaken by this component of the private sector in various communities across the country.

Developers increasingly are agreeing to bear some of the costs of transit projects from which they directly benefit. For example, some have agreed to share in the cost of station construction or reconstruction, others have entered into

agreements to provide some form of transit service for new projects.

It is important to note, however, that the mix of private sector involvement in transit will differ from community to community. No two communities have identical needs, resources, geography, or traditions. The advantage of increasing the role of the private sector is the variety of options thus made available.

SENATOR ANDREWS: Why would the private sector become involved with an industry that has not been profit making during recent years and shows no indication of becoming profit making in the foreseeable future?

ANSWER: Our interest in seeking greater involvement by the private sector in transit is to reduce the overall transit operating deficit and to improve the service made available. The attractions to the private sector are as varied as the private sector is varied. Private operators can provide some service, such as commuter bus, at a profit and without a subsidy. Other service can be contracted with a private operator at a lower subsidy level, typically 20-60 percent lower according to recent studies. Employers and businesses have a stake in their community's transit network. In Hartford, for example, employers and community and business leaders have joined together to develop a coordinated transit strategy for that city that includes public transit, ridersharing, staggered work hours, parking restrictions and the like. Developers are also directly concerned with transit. In several communities, such as Los Angeles, developers have agreed to help fund transit improvements in recognition of the benefits they derive from them.

We believe that with the public and private sectors focusing on their interest in an effective transit network a more realistic market segmented approach to transit will develop. The result will be better transit service for more people at a lower cost to the taxpayer.

SENATOR ANDREWS: How will the efforts being undertaken by UMTA coordinate with private sector involvement already underway at the local level?

ANSWER: We fully expect that our efforts to encourage greater use of the private sector in transit will act to reinforce existing local government's desire to reduce costs through their involvement. The Department's policy statement on Private Enterprise Participation in the UMTA Program is process oriented, we do not seek to mandate any particular strategy. Our policy stresses early and regular consultation with the private sector in the local planning process and stresses consideration of private providers when new service is being developed or existing service is being restructured. We stress in the Statement that exactly how this should be done is a local decision, including the process governing complaints and oversight function.

With this degree of flexibility in our policy, I forsee a very smooth interface between our efforts and those of State and local governments.

SENATOR ANDREWS: What kind of financial benefits does the Federal Government expect to achieve from the new program? Will the financial benefits be shared with the local transit systems?

ANSWER: We expect the direct financial benefits from increased reliance on the private sector in transit to accrue to State and local transit authorities, and eventually to each taxpayer through lower subsidies to transit. We know, for example, that contracting with the private sector for transit operations can save 20 percent to 60 percent in operating costs. This would accrue to the entity letting the contract. Other types of savings are possible and will vary from one locality on to the other--including privately sponsored and funded service as well as unsubsidized private operators. A recent Rice Center Study, New Directions in Urban Transportation: Private/Public Partnership details a host of specific examples.

We share information of this nature with State and local governments and, in fact, have recently awarded some research grants to answer some of the more detailed questions we are receiving. As this work is complete, we will make it available for any one who is interested. We are also engaged in activities that will foster closer harmony between local decisionmakers and private sector participants with a mutual interest in improving local mobility. In all of this, we are trying to emphasize that which has been demonstrated to work, recognizing that individual states and localities have widely varied needs.

The benefit to the Federal Government, we hope, will be a transit program more attuned to State and local needs, and a program that will give local government greater flexibility and greater responsibility in meeting local needs, rather than rely as heavily on the Federal Government.

We need to reverse the trend of the last few years and become the source of last resort, rather than the source of first resort in addressing a problem that differs so widely from location to location and one that washington is ill-equipped to solve.

SENATOR ANDREWS: What types of private sector involvements are expected that would impact capital costs?

ANSWER: Types of private sector involvement in capital projects can take a number of forms. Direct cost sharing at the time of construction, payments through a benefits assessment district established to help fund a particular project, lease arrangements in conjunction with a transit project, political support for a local bond issue, all have been used by one community or another. The Private/Public Partnership Study I mentioned earlier is replete with examples of private involvement in transit projects. I will be happy to provide the Subcommittee with a copy for its records.

SENATOR ANDREWS: Will this office be involved in both operating and capital projects? What percentage in each?

ANSWER: With respect to involvement of the Office of Private Sector Initiatives in particular projects, it is not possible to specify particular types of projects. The office seeks to encourage communities to include the private sector in all its transit plans and projects, but because those plans and projects are initiated at the local level, local priorities would determine whether private involvement is sought for any individual capital or operating projects.

SENATOR ANDREWS: Does UMTA have any documentation on the current extent of Private involvement in Transit? e.g.. contracting out for service to the elderly and handicapped contracting our regular route service contracting out overhaul, retrofit work.

ANSWER: A review of transit industry operating data compiled under Section 15 of the Urban Mass Transportation Act for fiscal year 1983 shows that the aggregate operating expenses for all UMTA grantees was $8.578 billion, and that $163 million of that went to operations provided by the private sector. Slightly less than 2 percent, then, of the industry's operating expenditures represents private sector operations. This estimate does not include the cost of independently provided service.

FAIR LABOR STANDARDS ACT (FLSA)

SENATOR ANDREWS: The Supreme Court recently ruled that the Fair Labor Standards Act applies to local public transit systems. What effect will this have on local transit systems? Will this increase operating costs to transit systems?

ANSWER: The Court's decision may mean higher overtime wages for many public transit employees, but more careful study will have to be made before a definite statement can be made. Secretary Dole and the UMTA Administrator have met with the APTA Executive Board on this issue. The UMTA Administrator has also written to the Department of Labor stating the Department's concern about the potential financial impact of the decision and the manner in which the Department of Labor plans to administer the overtime provisions of the Fair Labor Standards Act with respect to transit. In that letter the Administrator expressed the Department's willingness to work with the Department of Labor in applying the FLSA to transit, and requested a meeting to discuss this issue.

SENATOR ANDREWS: Did the Justice Department agree that there is a Federal interest in applying the FLSA to public transit systems?

ANSWER: The Department of Justice considers itself obligated, except in rare circumstances, to defend the constitutionality of statutes enacted by Congress, regardless of the Executive Branch's policy views on the statutes. Therefore, the Justice Department took the position that Congress' decision to extend the FLSA to transit employees was permissible under the Constitution.