HEARING EXAMINER
THOMAS W. SADLER
*******
August 19, 1999
10:00 a.m.
*******
Presented by
GERALD R. HANAS
General Manager
Northern Indiana Commuter Transportation District
American Public Transit Association
1201 New York Avenue, N. W.
Washington, DC 20005
(202) 898-4000
APTA is a nonprofit international association of over 1,200 member organizations including transit systems; planning, design, construction and finance firms; product and service providers; academic institutions, and state associations and departments of transportation. APTA members serve the public interest by providing safe, efficient and economical transit services and products. Over ninety percent of persons using public transportation in the United States and Canada are served by APTA members.
Good morning Mr. Sadler. I am Gerald Hanas, Chair of the Commuter Rail
Legislative Subcommittee of the American Public Transit Association (APTA) and General
Manager of the Northern Indiana Commuter Transportation District (NICTD). I am testifying
today on behalf of APTA.
APTA appreciates the opportunity to discuss with you the federal
railroad retirement system and the issues raised in the Railroad Retirement Board's
decision last fall regarding Railroad Ventures, Inc. The case raises important issues for
a number of APTA's commuter rail members who contract out their operations and that is why
APTA asked to present testimony today.
Let me first give you a brief overview of the commuter rail operations
in the United States that collectively transport over one million passengers a day. I
suspect you are well aware of the service that is operated by my agency, Northern Indiana
Commuter Transportation District and our sister agency, Metra, here in Chicago, as well as
the operations of the other eastern commuter rail agencies that were created approximately
twenty years to take over regional passenger rail operations -- the Long Island Rail Road
and Metro-North in New York, SEPTA in Philadelphia and NJ TRANSIT. All of these are public
agencies that plan, manage and directly operate commuter rail service.
Another group of APTA commuter rail members contract out the operation
of rail service. These public agencies include the MBTA in Boston, the Connecticut
Department of Transportation, MARC train service in Maryland, Virginia Railway Express,
Tri-Rail in Miami, Trinity Railway Express in Dallas and Ft. Worth, North County Transit
District in San Diego, Metrolink in Los Angeles, Altamont Commuter Express in Stockton,
California; and Caltrain in San Francisco. Two additional contract commuter operations are
scheduled to be initiated during the next year by Sound Transit in Seattle, and the State
of Vermont Department of Transportation in Burlington. You will note that several of these
agencies have been the subject of Board decisions in the past.
These commuter rail agencies do not run railroad operations and
have no railroad employees. They have chosen to contract out railroad activities
to other entities. The staff of these agencies are generally engaged in overseeing third
party operating contracts; managing governmental and public relations and obtaining public
funding support; and, in many instances, negotiating trackage rights agreements with the
owners of the railroad right-of-way.
All of the new commuter rail systems that have initiated services in
the last decade have contracted out operations, and this organizational structure has
become a general model for new commuter rail systems across the nation. This
organizational format has been adopted because it offers public agencies the flexibility
they need to develop and start operations of mass transit projects in a timely manner;
and, for this level of service, it is the most cost effective way to provide service. Both
of these are very important factors to the states, counties and cities that have chosen to
implement commuter rail service in order to reduce congestion, improve air quality and to
achieve other regional economic, environmental and energy goals.
While these public agencies share a common bond in that they contract
out the operation and maintenance of their service, other aspects of their organization
vary significantly. Some of the commuter rail agencies are departments of state
government, some are public transit agencies that have been established to run several
modes of transit service, and some are special purpose districts created solely to oversee
the operation of commuter rail service. Some own their railroad right-of-way, some use
rights-of-way owned by state or local governments, while others have established operating
rights agreements with Class 1 railroads. But in all instances they are public agencies
that are responsible for and accountable to the public for the efficient and effective
provision of commuter rail service. These public agencies are not considered
"employers" for purposes of railroad retirement, nor should they be.
It is significant to note that these organizational arrangements for
new public commuter rail agencies evolved during a period in which the Railroad Retirement
Board has held that certain governmental employers were not covered by the Railroad
Retirement Act and the Railroad Unemployment Insurance Act (RRA/RUIA). Recognizing that
the Board's General Counsel has found these exemptions to be discretionary acts on the
part of the Board, APTA is very concerned that the Railroad Ventures decision could result
in the Board's reversal of its prior findings regarding this type of arrangement for
public commuter rail operations. In this regard, I would note that the factors that the
Board has used in the past to distinguish between day-to-day railroad operational
functions on the one hand and governmental oversight and other non-covered functions on
the other hand, continue to be true today.
I am not a lawyer and am not prepared to argue definitions of who is an
employer and who has authority to operate a railroad, and I will certainly not attempt to
provide you with a long list of decisions that the Board has made that argue for
continuation of the current status of contracted public commuter rail operations. I will
leave those efforts to the lawyers and simply state that we believe that the Management
Member's dissent presents a sound basis for reversing the Railroad Ventures decision.
Instead I want to focus on the public policy issues involved here and
the need to continue to encourage cost efficient public transit operations. At the
federal, state and local level, mass transit has been viewed as a high priority. Last year
Congress enacted the Transportation Equity Act for the Twenty First Century (TEA-21). This
bill authorizes funding for new highway and transit projects for seven years. Included in
the list of specific projects that Congress authorized in the bill are approximately 200
new start rail transit projects. While these projects include light rail and heavy transit
rail proposals, a number of commuter rail projects were authorized by Congress.
Many of these projects seek to protect abandoned railroad rights-of-way
for future public purposes. Unfortunately, however, should the public agencies that are
seeking to acquire these rights-of-way become subject to costly RRA/RUIA requirements,
there will be less incentive to seek public ownership, and the projects that Congress
authorized will be substantially more burdensome and costly to implement. Without knowing
that cost effective contracted rail operations would be possible, public agencies will not
seek to keep railroad rights-of-way in the public domain.
As I indicated earlier, some existing public transit agencies have
found that it is more cost effective to run contracted commuter rail operations than it is
to operate service directly. An important reason for this is the lower public employee
personnel and fringe benefits costs in systems other than railroad retirement. It is no
secret that it simply costs both the employer and employee more to support railroad
retirement. Last year I calculated that under 1998 rates, a hypothetical railroad employee
with an annual salary of $40,000 will cost my agency $9,500 in Tier I and Tier II Railroad
Retirement plus Medicare benefits. If that employee was covered under Social Security,
plus the Public Employees Retirement Fund Pension for Indiana Government Employees, that
same employee would cost NICTD $5,260. This is a difference of 45 percent, a
difference that the new public agencies have not been able to justify to the taxpayers
that support and subsidize the cost of commuter rail service. Contributions by the
employee are higher under the Railroad Retirement system.
As you consider the impact of a 45% increase in the pension portion of
a public agency's budget, it must be remembered that none of APTA's commuter rail members
have profitable services. All of them are subsidized by a variety of federal, state and
local funding sources, all of which, ultimately, come from taxpayers. Suffice it to say,
such an increase could strain local budgets dramatically and could make proposed new
services prohibitively expensive.
In addition to concerns about the higher costs that would be incurred
if they were subject to RRA/RUIA, our members are also concerned about the status of their
current employees. In these agencies finance, procurement, governmental and public
relations and various other staff members work on both rail and bus or light rail
projects. It is not possible to allocate staff strictly to rail or bus activities and
still maintain efficient staffing in a public organization. The issue gets even more
complicated with regard to supervisory staff that manage employees that work on all of the
modes of service that the agency provides, and it raises the question of how far up the
chain of command RRA eligibility should go. Would, for example, the Connecticut
Commissioner of Transportation be subject to RRA/RUIA because the Department of
Transportation contracts for rail service? Or how about the Governor for that matter?
Obviously, these issues would become the subject of Railroad Retirement
Board audits. I understand that, unfortunately, past audits regarding coverage in public
agencies have been protracted, draining the resources of both the Railroad Retirement
Board and the railroads. It should also be noted that many multi-modal transit agencies
have negotiated collective bargaining agreements regarding benefits and pension plans with
non-rail unions. Should railroad retirement coverage be extended to staff at these
agencies, there could be a significant impact on pension plans that are covered by these
bargaining agreements, potentially resulting in litigation for the transit agency.
It is also important to note that APTA's member agencies that contract
with third parties to operate their commuter rail services have been operating for a
number of years under systems other than railroad retirement, relying on rulings of this
Board. To impose a change at this date would be extremely unfair to the employees who have
established their own personal retirement plans based upon the benefits provided by our
members. As public agencies, all of APTA's members have established fair and competitive
retirement programs for their employees. Further, having to segregate one group of
employees into a "railroad group" could make these public sector jobs
significantly less attractive to the incumbent employees, many of whom were attracted to
them because of the diverse experience they could gain working in a multi-modal agency.
In closing, I want to emphasize that the interests of the public need
to be considered and protected in your deliberations. The public wants high quality public
transportation, including commuter rail service, and they insist that transit services be
run in the most efficient manner possible. They want available dollars to be spent on
providing more service, not for more expensive pension systems -- and they take careful
note of the salaries and benefits that public employees receive.
APTA urges you and the Railroad Retirement Board not to presume that
ownership of railroad right-of-way means that an agency is running a railroad; and not to
change the coverage status of contracted public commuter rail operations. We feel that the
Railroad Ventures decision should be reversed, insuring that our members who do not run
railroad operations are able to continue serving the public efficiently and effectively.
Thank you for the opportunity to testify on this important topic. I would be happy to
provide any additional information that you or Members of the Board may require.
K:\GOVTREL\RRR\Railroad Ventures\RRR testimony.doc
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