The simplest way to understand the mechanics of the new Charter Service regulation is to consider it in a timeline

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1 Charter Service Final Rule The simplest way to understand the mechanics of the new Charter Service regulation is to consider it in a timeline Establishing Service The willing & able process of the old regulation has been completely done away with. Private operators who wish to be considered as Registered Charter Providers (a new term of art RCP throughout this paper) will now go to a central FTA internet site to register. There, the RCP will designate the areas they wish to be considered as providing service in. When a transit agency is considering charter business that would have fallen under the old willing & able process, it need only look to the FTA internet site to find those RCP working in the area. There is no longer a need to publish annual notices or for transit agencies to maintain lists of private operators everything comes through the internet site. (604.13) Additionally, organizations that seek services and provide services to those with limited mobility due to age, persons with disabilities, or low income (now referred to as Qualified Human Service Organizations QHSO throughout this paper) will qualify for those services in one of two ways. Those organizations may certify receipt of funding through one of the 64 federally assisted transportation programs (listed in an appendix to the regulation) and automatically be deemed a QHSO. Other organizations that provide services to those with limited mobility due to age, persons with disabilities, or low income (but receive no funding through one of the 64 federal programs) may also qualify by signing up at the FTA internet site and providing basic information about their mission and circumstances. (604.15) Receiving and Analyzing a Request for Services The first step in analyzing any request for services is to determine if it is subject to the regulation at all. FTA has noted several services that are NOT charter service and not subject to the regulation at all. These are Demand responsive service Demand responsive service is not covered by the new regulation. (604.3(c)). Transit agency business This allows transit agencies to transport their employees, employees of other transit systems, management officials, contractors, prospective contractors, or official

2 guests to inspect, evaluate, or review transit projects or facilities in the agency s service area (or proposed service area). (604.3(c)). Emergency preparedness This allows transit agencies to transport their employees, employees of other transit systems, management officials, contractors, prospective contractors, or official guests for emergency preparedness planning and operations. (604.3(c)). Section 5310, Section 5311, JARC, and New Freedom programs Services provided under the Section 5310 (elderly and persons with disabilities), Section 5311 (rural program), Job Access/Reverse Commute, and New Freedom programs are not covered by the new regulation. (604.3(c)). Emergency response This allows transit agencies to respond to emergency situations, whether declared by federal, state, or local officials, or take immediate actions necessary prior to a formal declaration for the first 45 days of the emergency situation (continuation past the 45 day mark will require formal FTA concurrence. (604.3(c)). Rural training This allows rural transit agencies to transport their employees and contractors beyond their normal service areas for training. (604.3(c)). Services provided without third party payment or premium fare Even exclusive service on what FTA refers to as an irregular or limited basis when it is not paid for (in whole or part) by a third party and where riders are not required to pay a premium fare. While FTA has not defined the terms irregular or limited basis or premium fare, it appears that this will allow event or even one-time service where that service is provided without outside funding and where any fare charged fits reasonably into the overall fare structure. FTA has acknowledged the broad array of fares many systems employ and indicated they will apply a reasonableness test when determining if a fare charged is premium. (Appendix A, Q&A 18 and 604.3(c)(2)). The second step in the analytic process is determining whether the proposed service fits the definition of charter provided in the updated regulation. Charter service is (1) requested by an outside party (i.e., not the transit system s own idea), (2) provided for exclusive use of some group, (3) at a negotiated price. An important consideration in this definition is that exclusive does not necessarily mean closed door. The word is formally defined as service a reasonable person would conclude is intended to exclude members of the public. The definition is somewhat clouded by a list of circumstances that FTA believes may be characteristic of charter service. These include a third party paying the negotiated price for the group or collecting any fares charged to individual riders, service that isn t part of the regular schedule or only offered for a limited period of time, or circumstances where the outside party

3 determines origin, destination, and scheduling. It appears these characteristics don t change the basic definition but we will continue to seek clarification. Assuming the proposed service is indeed charter service, the next step is to determine if an exception applies. The first exception looks at non-transit government business. Under this exception, transit agencies may provide up to 80 hours per year (total service hours, even where an agency supports multiple government bodies) of service in support of government business (e.g., the City Council visiting a new sewage treatment plant site). It is unclear how this exception will intersect with the general allowance of service provided without payment. As noted above, Q&A 18 indicates service provided without charge is outside of the charter rule and not limited by it. The government business exception specifies that the transit agency not receive payment for services under the exception (except where laws require some payment such as ethics rules). The language of this exception was drafted long before Q&A 18 and the language was never revised to account for Q&A 18. Services provided to QHSA organizations. Whether qualified through one of the 64 federal programs or by registering at the web site, QHSA organizations are eligible for free or reduced price services under this exception. There is no hour limit. Leasing equipment to an RCP. This exception allows transit agencies to lease equipment/drivers to private providers, but only when all of the private equipment of all of the RCP self-identified as providing service in the agency s operating area has been exhausted. Although similar to the prior provision allowing leasing, this new provision requires the RCP to certify that all of the available vehicles of all registered charter providers in the recipient s geographic service area and the transit agency to verify that [this] certification is accurate by counting up all of the equipment of all RCPs in the area. There is no explanation in the rule of how the transit agency could confirm that the other RCPs were otherwise engaged or what this count would be expected to show. Nor is there any indication of how FTA will treat an RCP that is simply not interested (e.g., a provider that signs up in city A although it works primarily many miles away in city B and would only want to take business in city A that is significant enough to justify a long move). Agreement with all RCPs in the area. As in the earlier version of the regulation, a transit agency may enter into an agreement with all of the RCPs registered in its geographic area. These agreements can allow any lawful use of transit agency equipment without regard to the regulation as long as all agree. A change from the earlier regulation, however, limits application of the agreement. A new RCP can register in the geographic service area at any time and, unless they join the agreement, the agreement expires 90 days after the new RCP signs up. Also, any party can back out of an existing agreement and, once again, it would expire 90 days after notice.

4 No RCP responds to a notice. This is the latter portion of the old willing & able exception. When a transit agency is asked to provide charter service that is not subject to an exception and wishes to do so, the agency consults the FTA internet site to get a list of RCP in the geographic service area. The agency notifies the RCPs of the request for service by (and fax if the e- mail is undeliverable) and must wait for responses (72 hours for service to be provided within 30 days, 14 days for service proposed more than 30 days out). If no RCP notes an interest in providing the service, the transit agency is free to do so. As under the old rule, if any RCP notes an interest in providing the service, the transit agency may not provide it even if the customer and RCP never come to agreement. Petitions to the Administrator. The new rule recognizes the FTA Administrator s inherent authority to waive or modify the rule and provides circumstances where that might happen. There is a list of required information to be submitted in section The first instance is for events of national or regional significance. The regulation requires, among other things, that the transit agency certify that all RCPs in the area have been exhausted. It is again unclear how a transit agency would account for the equipment of RCPs. The second instance is for hardship applicable only in rural or small urban areas and defined as deadhead time that exceeds the total trip time. The third instance is for unique and time sensitive events. Discussion in the original NPRM centered on events such as presidential funerals but the only unique requirement in the final regulation is to note how the event is unique or time sensitive and why service would be in the public interest. Advisory Opinions The new regulation allows any interested party (broadly defined as anyone with a financial interest) to ask FTA for an advisory opinion. One particularly important aspect of this new formal advisory function is that it completely replaces the interaction with FTA regional personnel that many agencies have relied on for many years. In the interest of consistency, all formal (i.e., anything an agency may later rely on) advice and all opinions from FTA will now come from the headquarters. Transit agencies considering any service anywhere near the fringes of the new regulatory scheme would be well advised to utilize this option to preclude later findings (on complaints or triennial reviews) that could endanger their federal funding. Only written advisory opinions have any weight under this new system. These same interested parties can now ask FTA for a cease and desist order. Essentially, it allows an RCP to preemptively complain about a proposed service and force the transit agency to respond to any complaints within three days. FTA has indicated it will respond within ten days to requests for advisory opinions and cease and desist orders.

5 Complaints The complaint process, centralized at FTA headquarters, is now significantly more formal than in any prior version of the regulation, including service of process, formal answers to complaints, reply documents, investigations, and (when FTA deems it appropriate) appointment of quasijudicial Presiding Officials that may order formal discovery, hearings, and depositions. One significant change in the complaint process is that complaints may now be filed against RCPs as well as transit agencies. Although complaints against RCPs are significantly less complicated (there is simply a complaint and an answer with no provision for additional proceedings), the opportunity is available to take action when an RCP acts in bad faith (e.g., responds to a notice stopping a transit agency from providing charter service but never contacts the customer, etc.), commits fraud, loses its operating authority or insurance, or files frivolous complaints against transit agencies. The remedy for violations by RCPs is removal from their status as an RCP for up to three years. Remedies One of the more controversial aspects of the new regulation is the broad array of penalties FTA asserts authority to assess. In short, FTA believes it is required to withhold some amount of funding when it finds a pattern of violations (defined as two violations of any aspect of the rule except record keeping in a six year period whether the violations are founded complaints or triennial review findings). FTA also believes it has authority to order withholding of federal funds based on a single event (a position directly contrary to the understanding of the drafters of SAFETEA-LU). Transit agencies facing complaints or adverse triennial review findings should keep these remedy provisions in mind when responding to either circumstance. An additional aspect of this regulatory scheme is FTA s assertion that, unless appealed to the Administrator, no judicial appeal of FTA orders is available.

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