tiations with D.C. Transit for the acquisition of the mass transit bus system operated by that company, and, at such time as the Authority is in a position to do so, acquire and operate such system. I think we are all aware of the fact that the Washington Metropolitan Area Transit Authority compact does not seem clearly to permit the Authority to operate a mass transit bus system, and that accordingly there is some need to amend the compact to clarify this point. This will, of course, require appropriate action by the Legislatures of Maryland and Virginia at their sessions beginning next January, as well as by Congress. To deal with the possibility that a major transit crisis might occur prior to the time the Authority is clearly empowered to operate a mass transit bus system and interim measures authorized by the Congress might not be adequate to meet the need, the Congress may wish to consider the desirability of legislation which would authorize the District government, on a temporary basis, to acquire the mass transit bus system operated by D.C. Transit, and hold it until such time as the Washington Metropolitan Area Transit Authority is in a position to operate the bus system. However, in the expectation that appropriate action to amend the Washington Metropolitan Area Transit Authority compact can be taken by the two State legislatures within a year, the District prefers S. 1814, providing, as it does, for the Authority to take over the D.C. Transit bus system directly from the company, rather than through the District government. I think, Mr. Chairman, that I have clearly indicated to the committee that in my view, for the reasons I have set forth earlier, public ownership of the mass transit bus system serving the District of Columbia is the most feasible solution to the problem of providing adequate mass transportation at reasonable fares. Another approach to the problem, but one that is undesirable, in the view of the District, involves the automatic payment of a subsidy to D.C. Transit, as provided by S. 1813. The District Government has serious reservations with respect to paying public funds to a private concern over which the District Government itself exercises no control, and over which the Washington Metropolitan Area Transit Commission can exercise only those controls permitted under the compact. Most important is the fact that, because of the economic pressures to which I have referred earlier, and the ever rising costs of operation, the amount of subsidy which the District might be required to pay could, over the years, become so substantial as to preclude the financing of other essential District programs. In the event some form of subsidy is determined to be necessary, the District Government is opposed to that form which involves automatic and mandatory cash payments to the D.C. Transit. Rather, the District favors the interim financing provisions contained in S. 1814. These provisions would permit payments to be made to the company but subject to (1) the discretion of the District; This arrangement is preferable to that of S. 1813, which would require the city, upon the certification of a body not subject to the District's control, to pay over to a private concern large sums of public moneys, without any control over the use to which such moneys would be put, without any accounting to the District, without any limitation on the dividends which may be paid to the stockholders of the concern, and without any requirement that the concern, prior to the receipt of payments from the District, shall have liquidated such assets as may remain in its possession to pay its debts. Another means of providing interim financial assistance to the company in a form other than a direct cash payment is for the District or the Washington Metropolitan Area Transit Authority to enter into an arrangement whereby the District or the Authority would purchase buses to be leased back to D.C. Transit for an annual lease payment which is less than the current capital cost to the company of owning the vehicles. The advantage to the District of such a course of action is obvious. Should the transit company be acquired by some public body, the District's contribution to the purchase price would not have to be so large as would otherwise be the case if the company owned all of the vehicles used by it in its operations. Also, relieving the company of the need to finance the replacement of a portion of its fleet each year would free company funds to pay its obligations, thereby avoiding the repetition of the recent crisis. The District might be able to qualify for a Federal grant under the Urban Mass Transportation Act of 1964, if the District of Columbia be authorized by the Congress to participate in the programs available under that act to States, defined therein to include the District of Columbia. In order for the District government to be able to enter into such an arrangement, it will, of course, be necessary that section 5 of S. 1814 be appropriately amended. I think, however, Mr. Chairman, if D.C. Transit is to be provided with any form of public assistance, the company should make a real and substantial effort to put its financial house in order. Specifically, it should be made to come forward with a plan to pay its outstanding debts, including the approximately $2 million owed to the pension fund and the health and welfare plan, and its other outstanding debts. In this connection, D.C. Transit presently owns certain unencumbered real property, some of which is no longer needed for transit operations, that could be utilized in the payment of those obligations. I think the important thing is that some action be taken by the company to marshal its assets and pay off its debts, as an integral part of a program which would put it on a sound financial footing in the future. Generally, Mr. Chairman, as I have indicated above, the government of the District of Columbia, is in accord with the principles of S. 1814. I would like to suggest, however, that the Congress give consideration to the following possible changes. The first of these involves the possible expansion of the brief reference to the labor contracts of D.C. Transit, as set forth in section 3(a) of the bill, perhaps to include language similar to the labor provisions contained in section 37 of a bill recently enacted by the Maryland Legislature and awaiting the signature of the Governor, establishing for that State a metropolitan transit district and metropolitan transit authority. Next, the inclusion of language granting to the Washington Metropolitan Area Transit Authority the exclusive right to operate a mass transit bus system or systems within the District of Columbia, subject to the rights of any carrier lawfully operating such a system on the effective date of S. 1814, so long as the carrier's operations are conducted under a franchise granted to the carrier to operate in the District a mass transportation system of passengers for hire. Third, language vesting in the Authority the power of eminent domain, to be utilized by it, whenever necessary, to acquire such property, both real and personal, as the Authority may need in order to operate an efficient, effective mass transit bus system. Fourth, section 5 of the bill might be amended to give the Commissioner discretionary authority to purchase buses for lease-back to D.C. Transit, and to enter into an agreement with the company for the leasing of such vehicles for an annual lease payment which is less than the current capital cost to the company of owning those vehicles. Finally, the bill should contain a provision specifically authorizing the District of Columbia to participate in programs available under the Urban Mass Transportation Act of 1964. I note, Mr. Chairman, that S. 1814, unlike S. 1813, does not provide for rolling back to 25 cents the fare for regular route transportation within the District of Columbia. In this connection, while the District Government would prefer a fare lower than that presently in effect, it recognizes that the establishment of a lower fare, when taken in conjunction with the payment of a subsidy to D.C. Transit, would impose an undue burden on the taxpayers of the District. This burden would be further increased if such subsidy were in effect at the time the subway is in operation since the District would have to pay the revenue loss to the Authority. Also, the fixing by statute of the fare to be paid for regular route transportation within the District of Columbia would run counter to the financial plans of the Washington Metropolitan Area Transit Authority for the development and adoption of a mass transit plan for the Washington metropolitan area transit zone. Such plans are based on the assumption that fares will be increased from time to time to cover increases in operating costs, if they become necessary. Accordingly, the District government is of the view that legislation dealing with the mass transit bus situation in the District should not include any provision establishing in connection with determining the amount of any subsidy which may be paid to D.C. Transit, the fare charged for regular route transportation within the District. In summation, Mr. Chairman, the District government would support the provision of backup authority for interim payments to D.C. Transit System, Inc., only in conjunction with the acquisition of the company's mass transit bus facilities by a public body and only on condition that the company put its existing financial house in order. With respect to the nature of the financial assistance to be extended to D.C. Transit, the District is of the view that it should first be in some form other than a direct cash payment to the company, perhaps in a form along the line I have noted above, involving the purchase of buses by either the District government or the Washington Metropolitan Area Transit Authority. From the standpoint of the District, public ownership of the mass transit bus system, as provided by S. 1814, offers the most practical long-term solution to the mass transportation problem, and this course of action, for the reasons I have mentioned, is, in the District's view, preferable to the subsidy solution contained in S. 1813. Thank you, Mr. Chairman, for allowing me to express the views of the government of the District of Columbia on this matter. That concludes my presentation. I apologize to you for having to read it. Senator EAGLETON. Thank you, Mr. Fletcher. Do I take it that your statement has been cleared with the Bureau of the Budget? Mr. FLETCHER. It has, sir. Senator EAGLETON. Has the Mayor or you met with Mr. Chalk respecting the shortage in the union's trust funds? Mr. FLETCHER. We have, sir. Senator EAGLETON. Has anything come of those meetings to date? Mr. FLETCHER. Nothing definitive. We have indicated to Mr. Chalk in a meeting held in the Mayor's office some weeks ago that the Mayor's primary concern is that the arrearage in pensions and welfare funds be paid. The Mayor pointed out to Chalk that the Mayor's operation in this regard was not a legal one since the District of Columbia government is not directly involved in negotiations of this type. The Mayor recognizes it was an important function of the District to step in immediately when he was made aware of this pending problem. Although we must solve the problem, one thing we cannot afford to have in this city, at this time, is another strike as far as the bus company is concerned which would be really disastrous as far as our city is concerned. The Mayor did indicate to Mr. Chalk at that time that he would be hopeful that Mr. Chalk would present a plan to the union which would indicate the way in which the arrearage in those two funds would be paid over a period of time. Senator EAGLETON. In your statement you refer to certain properties that the D.C. Transit owned that possibly could be sold in order to pay off some of these debts. Do you know what these properties are? Mr. FLETCHER. Mr. Avery is going to be on the witness stand shortly. I prefer that he testify on that. Senator EAGLETON. Does the company owe the city anything at this time for track removal? Mr. FLETCHER. The present problem, as far as the track removal is concerned, at the time the system was transferred to Mr. Chalk, as I understand it-Mr. Kneipp can correct me on this-there was an obligation on the part of the company to pay the cost of track removal. This was done by the accumulation of money from the fare box over a period of time. Several years ago the accumulation amounted to somewhere between $4 million and $5 million. The District govern ment would call on those funds from time to time to, in fact, remove tracks. At the present time that fund contains about $174,000. It is estimated that to complete all the track removal over a number of years would cost about $18 million. However, we have not asked either the transit company or the transit commission to incur additional obligations at this particular time. Senator EAGLETON. I was concerned about past work already done and completed. Mr. FLETCHER. That is correct, and that has been paid for. In other words, the work which has been done has been paid for. Senator EAGLETON. Now in your statement you suggested that possibly the District of Columbia could temporarily acquire the transit company and operate it until such time as the compact could be amended to permit WMATA to be the operating agency. How do you contemplate this acquisition? Would it be by negotiation? Mr. FLETCHER. Yes, sir. Senator EAGLETON. And condemnation if negotiation failed? Mr. FLETCHER. Either way. Of course, we prefer on a negotiated. basis. We have prepared a bill of that type. However, it was our decision that, since even in that bill it was indicated that the ultimate operator should be WMATA, we ought to proceed that way because we recognize, of course, that there has to be an amendment by both Maryland, Virginia, and Congress to the compact. However, usual standard negotiations on any acquisition take a substantial period of time. It makes more sense for us to proceed that way. However, if there is any indication that the amendment of that compact would be hung up, then we think we ought to consider the interim measure of creating our own authority to acquire and operate the system until the contract is straightened out and WMATA could then take it over. It is simply an interim idea that should be kept in mind by Congress. Senator EAGLETON. Do you take it, in terms of your own reading of the compact and such advice as you have received from your counsel, that WMATA could own the transit company under the existing compact, but it could not necessarily operate it-that is, it could take title and then contract out the operational function? Mr. FLETCHER. This is my understanding although it is a very fuzzy, cloudy area. There is some legal indication they could acquire it and operate it. It would be a very lucrative position for them to be in. Senator EAGLETON. Where would the city get its financing under its interim proposal? Mr. FLETCHER. There are a variety of ways that could be available. Under S. 1814, there would be interim financing available. What we would have to do is determine how much it is. One of the possible ways, for example, would be in the acquisition of certain real estate properties that the company now owns. In our budget, presently being heard by the Appropriations Committee, is the acquisition of one of the car barns for $1.1 million. There are other properties that could be acquired. We may have to consider changes in our revenue package. These are things which would have to |