trict of Columbia. In contrast, S. 1814 would provide that the bus system operated by D.C. Transit Systems, Inc., would become a publicly owned facility through acquisition by WMATA. S. 1814 would also permit the District of Columbia to provide for interim financial assistance of the D.C. Transit System pending the establishment of public ownership. In his statement the Commissioner of the District of Columbia has quite effectively expressed the vital importance of an adequate public mass transportation system to the welfare of the city and has stated his support of the concept of public ownership of the bus system by WMATA. The continued existence of a healthy bus operation is essential to the success of WMATA's plans for a regional system of mass transportation, including both bus and rail rapid transit service. To illustrate the importance, let me point out that our traffic studies indicate that more than two-thirds of the persons using the rail system will accomplish some part of their journey by means of bus. Our plan provides for the highest possible coordination between existing and improved bus operations and the rail system. Our plans for the publicly owned rail system have been prepared on the basis of bus operations to be provided by privately owned companies. Routes have been selected which would permit ready transfer between systems. Schedules are to be coordinated. Arrangements are to be made for the sharing of fares by the rail system and the private bus operators. The success of these plans would depend upon the voluntary cooperation of the privately owned bus systems. The first operation of the rail system is scheduled for December 1972. We are prepared to begin our massive construction program 75 days after funds become available from Congress. The local communities are prepared to contribute their share of capital required for the construction of the rail transit system. This morning Prince Georges County, Md., signed an agreement for service contract, and I believe the capital contributions contract, where they will put up $86.6 million as their share. Eventually, we will have 97 miles of double tracked rail on exclusive rights-of-way, which will provide fast, convenient service throughout the region. Certainly, a healthy bus system is essential to our plans. These are based upon the assumption that this community will have a bus system equal to or better than that we have today to provide service to the thousands who will live beyond walking distance of our transit stations. Together, buses and rail will offer quick, efficient and easy access to all parts of the metropolitan area. In addition, while we will serve 290 million people in the rail transit system each year, many will still rely entirely on the bus system for transportation. In this regard, I should also point out that the Authority's financial plans are based on a fare structure which is tied to the prevailing basic bus rate. Any rollback of current bus fares would conflict with this basic assumption. Our financial plans also assume that subway fares will cover operating costs and provide income sufficient to support revenue bonds in the amount of $835 million. The service agreements now being signed by the local jurisdictions provide, in fact, that any jurisdiction desiring free or reduced fares will underwrite the revenue loss to the Authority resulting from such an arrangement. In considering any subsidy arrangements to D.C. Transit the Congress should be mindful of these facts and recognize that any mechanism to fix bus fares does have a significant impact on the financial plans for the subway and would impose an additional cost burden on the District government to cover revenue losses to the Authority. As I will point out later, I do not mean to imply that when the subway is in operation both bus and rail mass transportation cannot be provided at reasonable rates which people can afford to pay. To the contrary, our studies indicate that a viable bus operation can be efficiently and economically provided as part of a coordinated bus-rail transit system. We do not seek the D.C. Transit System. However, we are prepared to accept that responsibility if Congress agrees that the Authority should undertake responsibility for ownership and operations of bus facilities at this time. At present our mission is to plan and construct a regional rapid transit system. We are ready to begin construction. But within our organization we have the expertise and knowledge to undertake ownership and operation of bus service to the metropolitan area. On the point of whether or not we sought out D.C. Transit, I would like to clear the record up. It was roughly April 1967, not 1968, when the newspapers prominently displayed Mr. Chalk's statement that he wanted to sell D.C. Transit. At two or three executive sessions at the Authority we took note of the statements. And pursuant to that planned merger, Mr. Gleason, vice chairman of our board at this time, still a member, contacted Mr. Chalk. There were discussions between Mr. Chalk and Mr. Gleason, at one time General Graham and Mr. Gleason and Mr. Chalk. I participated in one such discussion. Mr. Chalk stated that it was his firm intention to sell D.C. Transit. We therefore felt it incumbent upon us, being responsible for regional transportation, to investigate this and determine whether it might be feasible for the Authority eventually to acquire the biggest bus system in the region, since we realized that the coordination of bus and rail operations is essential for the success of the system. At that time Mr. Chalk favored public acquisition of D.C. Transit, contrary to his changing his opinion, apparently, today, where he indicated he thought it would not be efficient. At that time he indicated to us in writing that it would be the obvious thing to do, it would bring about efficiency. The contract continued to comment on some of the aspects that have been gone into. Mr. Chairman, the contract which was proposed to the Transit Authority was not really proposed at our request. The Authority did not request the contract. It did also exclude, expressly exclude, the charter and sightseeing operations, which we understand are lucrative. It also did not include W.V. & M. It really listed that as a separate item with a $3 million price tag, as I recall, plus assumption of $3 million in debt. We, even back in 1967, were informed there were serious financial problems with D.C. Transit. Mr. Chalk did say $40 million was his figure. We consider this too much, too high, and as he indicated we have had it appraised. We would not want to disclose the appraisal figure publicly, since it may later become a figure that we have to deal with, but if the committee desires this figure, we would certainly furnish it, preferably in executive session. Ownership and operation of the bus systems by the Authority would facilitate coordination of bus and rail operations. Common ownership and operation by the Authority could be expected to result in improved efficiency and economy of operation through the consolidation of management and the elimination of duplicative service. S. 1814 expresses the concern of Congress for the continued existence of adequate public transportation in the Washington metropolitan area and states that WMATA should initiate negotiations for early acquisition of the D.C. Transit System, Inc. This we can do. But if we are thus to acquire those facilities, the terms of the Washington Metropolitan Area Transit Regulation Compact must be amended to permit Authority operation of the bus system. Once the interstate compact is appropriately amended by the signatories and approved by the Congress, it would then be necessary for the Authority to develop and adopt a plan of financing to cover both bus acquisitions and service. As an interim measure, the provisions in S. 1814 appear adequate to provide backup authority for controlled, temporary financial relief. The provision requiring the Commissioner of the District of Columbia to seek the advice of the Transit Authority would help to assure coordination with our plans for rail rapid transit service and any efforts which might be then underway to acquire bus systems. In light of my earlier comments concerning the close relationship between the bus and subway fare structure, we recognize the importance of the District satisfying itself that there is actually a need for interim financial assistance before such permissive authority would be invoked. S. 1814 grants congressional consent to appropriate amendments of the Compact and adopts and enacts such amendments for the District of Columbia. Where existing law would require the Authority to provide by contract for operation of its facilities by a private entrepreneur, the amendments would also properly permit direct operation by the Authority. If these amendments are consented to by the Congress at this time, it would facilitate their ratification by the legislatures of Virginia and Maryland. I would agree with Commissioner Washington that these amendments should be enlarged to expand the Authority's power of eminent domain to permit it to acquire by condemnation properties owned by D.C. Transit. The granting of such power is necessary for the accomplishment of the purposes of the bill. However, before exercising that prerogative, the Authority would negotiate with D.C. Transit for a mutually agreeable purchase arrangement. Therefore, any provision permitting condemnation should be limited to the situation where we are unable to agree upon an equitable price for the facilities. There may well be justification for expansion of the labor provisions in the bill as suggested by Commissioner Washington. However, the extent to which this would be necessary, in light of provisions already in the WMATA Compact and the Urban Mass Transportation Act of 1964, is not entirely clear, and we would, therefore, like to furnish additional written comments on this question to the committee at a later time. Thank you, Mr. Chairman, for giving the Authority the opportunity to testify before this committee. Senator EAGLETON. We will put in the record at this time, since reference has been made to it, the letter of August 8, 1968, wherein Mr. Chalk wrote to Mr. James P. Gleason of the Washington Metropolitan Area Transit Authority and appended to the letter a proposed contract, which has been referred to by Mr. Chalk, Mr. Babson, and myself. (The documents follow :) Mr. JAMES P. GLEASON, D. C. TRANSIT SYSTEM, INC., Washington, D.C., August 8, 1968. Chairman, Washington Metropolitan Area Transit Authority, DEAR MR. GLEASON: As per our last conference, I am herewith enclosing two copies of proposed form of contract outlining the terms we discussed. I am sure there will be a number of matters that require further consideration and discussion. I should be pleased to meet with you again at any time in the near future. Very truly yours, Enclosures. Agreement dated O. ROY CHALK, President and Chairman of the Board. (herein sometimes called "this Agreement") between D.C. Transit System, Inc., a District of Columbia corporation (herein sometimes called "Transit"), and the Washington Metropolitan Area Transit Authority (herein sometimes called "the Authority"). WITNESSETH Whereas the Authority was created by an interstate compact between Maryland, Virginia, and the District of Columbia pursuant to Public Law 89-774 (Act of November 6, 1966, 80 Stat. 1326) and is empowered to acquire by contract real and personal property necessary or useful in rendering transit service in the Washington Metropolitan Area Transit Zone ("Zone") as defined in such compact; and Whereas Transit operates a mass transit system in the Zone; and Whereas Transit desires to sell certain of its assets, with certain exceptions as hereinafter set forth, and the Authority desires to acquire such assets by contract; Now, therefore In consideration of the premises, and the representations, warranties, covenants and agreements hereinafter set forth, and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Transit and the Authority hereby agrees as follows: 1. TRANSFER OF ASSETS AND RELATED TRANSACTIONS 1.1 Transfer of Assets of Transit. Transit shall, subject to the terms and conditions hereof, transfer, convey, assign and deliver to the Authority on the Closing Date (hereinafter defined) the then existing mass transit service business and assets (except as provided in Section 1.2 hereof) of Transit, including without limitation all personal property, machinery, tools and equipment, automobiles, buses and trucks, furniture and fixtures, inventories, supplies, cash, bank accounts, accounts receivable, contracts, leases, easements, franchise rights, property rights and permits, if any. Such assets (except as provided in Section 1.2 hereof) shall include those owned by Transit on June 30, 1968, as reflected in Transit's unaudited Balance Sheet referred to in Section 4.4 hereof, with only such changes therein as shall have occurred in the ordinary course of the business of Transit between June 30, 1968 and the Closing Date, or otherwise as may be consented to or approved by the Authority in writing. We would not want to disclose the appraisal figure publicly, since it may later become a figure that we have to deal with, but if the committee desires this figure, we would certainly furnish it, preferably in executive session. Ownership and operation of the bus systems by the Authority would facilitate coordination of bus and rail operations. Common ownership and operation by the Authority could be expected to result in improved efficiency and economy of operation through the consolidation of management and the elimination of duplicative service. S. 1814 expresses the concern of Congress for the continued existence of adequate public transportation in the Washington metropolitan area and states that WMATA should initiate negotiations for early acquisition of the D.C. Transit System, Inc. This we can do. But if we are thus to acquire those facilities, the terms of the Washington Metropolitan Area Transit Regulation Compact must be amended to permit Authority operation of the bus system. Once the interstate compact is appropriately amended by the signatories and approved by the Congress, it would then be necessary for the Authority to develop and adopt a plan of financing to cover both bus acquisitions and service. As an interim measure, the provisions in S. 1814 appear adequate to provide backup authority for controlled, temporary financial relief. The provision requiring the Commissioner of the District of Columbia to seek the advice of the Transit Authority would help to assure coordination with our plans for rail rapid transit service and any efforts which might be then underway to acquire bus systems. In light of my earlier comments concerning the close relationship between the bus and subway fare structure, we recognize the importance of the District satisfying itself that there is actually a need for interim financial assistance before such permissive authority would be invoked. S. 1814 grants congressional consent to appropriate amendments of the Compact and adopts and enacts such amendments for the District of Columbia. Where existing law would require the Authority to provide by contract for operation of its facilities by a private entrepreneur, the amendments would also properly permit direct operation by the Authority. If these amendments are consented to by the Congress at this time, it would facilitate their ratification by the legislatures of Virginia and Maryland. I would agree with Commissioner Washington that these amendments should be enlarged to expand the Authority's power of eminent domain to permit it to acquire by condemnation properties owned by D.C. Transit. The granting of such power is necessary for the accomplishment of the purposes of the bill. However, before exercising that prerogative, the Authority would negotiate with D.C. Transit for a mutually agreeable purchase arrangement. Therefore, any provision permitting condemnation should be limited to the situation where we are unable to agree upon an equitable price for the facilities. There may well be justification for expansion of the labor provisions in the bill as suggested by Commissioner Washington. However, the extent to which this would be necessary, in light of provisions already in the WMATA Compact and the Urban Mass Transportation Act of 1964, is not entirely clear, and we would, therefore, like to furnish |