maintenance under their provisions.

More important to the result, is the fact that the arrangements do not include municipal authority over fares and service. Regulatory control over the lessee is vested not in the city, but, as is the case with other carriers, in the State's public utilities commission. This separation of ownership and control is the principal weakness in the arrangement.

Concerning lease arrangements themselves, aside from Philadelphia's experience, they do present a number of special problems. In legal contemplation, a lease is a contract for the exclusive possession of property for a determinable period at a determinable rental. It is, itself, a species of property and carries with it not only a right to exclusive possession, but a right to quiet enjoyment of the property so long as the lessee's use is not inconsistent with the terms of the contract. Also, as is the case with any contract, while a lease is amendable during its term, this is possible only by mutual agreement of the parties.

These features of leases suggest difficult problems when it comes to contracting out the operation of publicly owned transit facilities. Would exclusive possession of the system by a lessee be compatible with the requirement for continuing public control over fares, revenues, expenditures, schedules, and standards of safety, maintenance and service? Under a lease the rights and obligations of the parties become fixed at the beginning of the leasehold. Modifications to accommodate changes in conditions not anticipated when the lease was negotiated can be accomplished only by agreement. In the absence of agreement, the provisions of the lease would have to be adhered to. Changes required in the public interest would have to await the expiration of the lease period.

The Agency recognizes that many of the possible difficulties attending leasing arrangements can be guarded against by limiting the term of any agreement, by providing for a periodic reopening of the lease for renegotiation, and in other ways. Consequently, while this approach to private operation of the proposed system has not been ruled out, leases are viewed as involving certain inherent problems that will require careful attention if that path is followed.

MANAGEMENT SERVICES CONTRACTS

Another type of contractual undertaking that will be available for use in Washington is best illustrated by that now being used in St. Louis, Mo., and Memphis, Tenn. The arrangements in both cities are very similar, and it may be helpful to review briefly that in effect in St. Louis.

There, the Bi-State Development Agency, a public agency of the States of Missouri and Illinois, established by interstate compact, owns the bus transportation system serving the St. Louis metropolitan area. The agency regulates fares, determines routes, and generally establishes policy for the operation of the system. It does not, however, operate its facilities nor does it employ any operating or maintenance personnel. The system is operated by a private corporation, the Transit Services Corp. of Metropolitan St. Louis (TSC) under a management-services contract with the agency.

Bi-State's present agreement became effective in the spring of 1963 and is for an initial term of 5 years. Thereafter, the contract continues for like periods with the right in either party to request changes or termination 180 days prior to the end of any such period. As consideration for its services, TSC receives a fixed fee of $230,000 annually. The fee does not include any of the costs and expenses of operating the facilities owned by Bi-State. It is designed to cover the salaries and payroll taxes of TSC's officers and staff, and the firm's corporate expenses. Under the contract the actual cost of operating the publicly owned facilities are paid by the agency to the contractor by way of reimbursement. TSC is engaged to provide full and complete management-services. It is responsible for the active direction of the system including:

1. Transportation.

2. Maintenance.

3. Labor relations.

4. Employee selection and training.

5. Management and supervision of Bi-State's insurance program. 6. Preparation of plans for consolidation of the agency's facilities, including integration of routes, reassignment of equipment, centralization of maintenance and office functions, coordination of labor contracts, development of a public information program, and recommendations as to fare structure.

7. The agreement provides that all revenues from the operation of the facilities shall, from their initial receipt, be and remain the absolute property of the agency, and that the corporation shall handle and account for them as directed by Bi-State.

8. TSC collects and deposits all revenues for the account of the agency. It keeps and maintains books and records in conformance with the requirements of, and at the direction of, the agency, and renders certified annual, monthly or other operating and financial reports requested by the agency.

9. Regarding expenditures, the contractor, on behalf of Bi-State, pays all amounts due and payable in connection with the operation of the agency's facilities. Vouchers and checks are drawn on the account of Bi-State by persons authorized by the agency to do so.

10. The contractor prepares and submits annual operating budgets for the agency's consideration and approval. Bi-State's obligations under the contract, in addition to payment of the fixed fee, include the establishment of fares, routes and standards of service, and, upon presentation of the contractor's certified statements, prompt reimbursement of TSC for all expenses and liabilities incurred for and on account of the operation of the agency's facilities, including the wages and salaries, social security, unemployment, and other applicable payroll taxes, of operating and maintenance employees, and other employee costs such as pensions, and the cost of medical and hospitalization programs. The agency provides for TSC's use a cash working fund sufficient to cover normal cash requirements, including the equivalent of the aggregate of reimbursible expenses for one payroll period. Upon advice from the contractor as to the type and amounts of materials, supplies, services, and equipment required for operations and maintenance, the agency determines the method of procurement. Bi-State may purchase directly, or may deputize TSC personnel to act for it. All property procured becomes the property of the agency.

Finally, Bi-State furnished the contractor with such office space, furniture, equipment, supplies, utilities, telephone service, secretarial and clerical help, automobile transportation, and other items and services as are reasonably required by TSC for the appropriate and efficient performance of its duties.

The executive director of the Bi-State Agency recently advised NCTA that operations under the existing contract have been very successful. The president of the Memphis Transit Authority has also indicated their success with the management contract. In the agency's judgment, such a device offers firm prospects, not only for the protection of the public interest, but also for obtaining the advantages of expert management by private persons experienced in the dayto-day conduct of urban mass transportation operations.

DEPRECIATION SCHEDULE

Mr. DENTON. What is the depreciation schedule on the subway cars? Mr. HERMAN. A 30-year depreciation schedule has been used in our computations.

Mr. DENTON. You think passengers will ride in 30-year-old cars? Mr. HERMAN. They ride 50-year-old cars now in several cities. Mr. MCCARTER. That is the standard depreciation schedule used in the transit industry. Most equipment lasts much longer but it is standard to use a 30-year depreciation schedule.

ADVISORY BOARD

Mr. DENTON. The act provides for a seven-man Advisory Board. Who are the members of this Board and just exactly what is their authority?

(The information follows:)

NATIONAL CAPITAL TRANSPORTATION AGENCY ADVISORY BOARD

The National Capital Transportation Agency Advisory Board was created by section 202 of the National Capital Transportation Act of 1960 (74 Stat. 538). As authorized by that act, the Board consisted of five members appointed by the President, by and with the advice and consent of the Senate, with the Chairman of the Board designated by the President. The National Capital Transportation Act of 1965 (Public Law 89-173) increased the membership of the Board to seven members.

The purpose of the Advisory Board is to advise the Administrator of the National Capital Transportation Agency in respect of such matters as the general policies of the Agency; Agency policies in connection with acquisition, design, and construction of facilities; fees for the use of Agency facilities and property; planning and administration generally; and such other matters as are referred to it by the Administrator or which the Board, in its discretion, may consider. The members of the Advisory Board are:

1. Gerry Levenberg, Esq., Chairman; partner, Prather, Levenberg & Seeger, Washington, D.C.

2. Dr. Robert C. Wood, Department of Economics and Social Sciences, Massachusetts Institute of Technology, Cambridge, Mass.

3. Frederick A. Gutheim, Dickerson, Md.

4. Edwin T. Holland, president, Old Dominion Bank, Arlington, Va.

5. Dr. G. Franklin Edwards, Department of Sociology, Howard University, Washington, D.C.

6. Vacancy.

7. Vacancy.

NON-FARE-BOX REVENUE

Mr. DENTON. In connection with other income you are apparently planning on certain concessions. Will you please describe for the committee just what type of concessions these will be and how they will operate?

Mr. MCCARTER. One of the principal concessions in the transportation industry is advertising, usually in the form of car cards in the vehicles.

Most buses have car cards around the edge of the overhead area. We expect that on the modern equipment that we will have these will be transparent with lighting from the back. This would not only improve the appearance of the vehicle but will provide a source of additional revenues.

In certain stations there will also be advertising panels which I hope will be backlighted and attractive. On the other hand, we hope to avoid the sale of items such as gum and candy which tend to make the passenger waiting areas unsightly and add to the maintenance problems of the stations.

Mr. DENTON. You will not have those?

Mr. MCCARTER. I prefer not to have them on the platform where people tend to throw wrappers all around.

Toronto does not have them because they want to keep it clean. If we have them, I would prefer that they be enclosed somewhat like the illustration in the budget document opposite page 3. I would prefer to have it a restricted area in order to cut down on the unsightly littering.

Mr. DENTON. You sell the advertising. How are they chosen? Mr. MCCARTER. Usually by negotiation after obtaining various proposals.

Mr. DENTON. You take the best bids?

Mr. MCCARTER. Yes. The most common method is that the contractor will pay a certain percentage of the gross income that they realize from the advertising, and the usual figure is 60 percent.

PUBLIC SALE OF REVENUE BONDS

Mr. DENTON. $281 million of the funding required for this project is to be derived from the public sale of bonds. We would like to have a detailed description of your plans in this connection.

Mr. MCCARTER. At this stage, no detailed plans have been developed for the issuance of the revenue bonds. The subcommittee may recall that in transmitting the program to the Congress, the President expressed his hope that this phase of the financing would be handled by the proposed interstate transportation compact, and pointed out that if a suitable compact is not ready in time, the administration will present alternative recommendations in time for Congress to consider the proper course to be taken. At this point, a compact has been approved by Maryland, but will not be considered by Virginia until its legislature meets in January. Consequently, it has not been possible to establish any details for the bond financing. This will be done as soon as the compact situation is clarified. On the matter of alternatives, the Bureau of the Budget advised the authorizing committees that it has under study the possible creation of a District of Columbia government corporation which could issue the necessary bonds with provision for their underwriting by the Federal and District Governments on a two-thirds, one-third basis.

Mr. DENTON. What happens if Congress does not pass legislation authorizing the bond issue?

Mr. MCCARTER. We would have a $150 million system perhaps if you appropriated $150 million.

Mr. DENTON. How much of a system can you build for that?

Mr. MCCARTER. I would estimate that just one route could be constructed for that sum.

FUNDS FOR SYSTEM STANDARDS, CRITERIA, SPECIFICATIONS, AND

SCHEDULING

Mr. DENTON. $1 million of the construction request is for system standards, criteria, specifications, and scheduling. What is the justification for this request?

Mr. MCCARTER. The two documents I have here are examples of the system standards developed

Mr. DENTON. Those are preliminary plans for the Toronto system. Mr. MCCARTER. That's right. One is the engineering plan for Toronto and the other is the architectural standards for the San Francisco system. Preliminary plans such as these establish for example the general configuration of the stations. This type of work must be done before we commence final design engineering at each station location. We will have to determine the exits and entrances, for example I have developed a checklist of about 20 items or elements that will need to be considered in the design of the stations. They include the method of fare collection and the location of fare-collection stations, crime control problems-all problems which have to be solved before a project can be given to the engineers for final design. This other document illustrates the work that must be done on architectural standards. This is the Manual of Architectural Standards developed in San Francisco. This was prepared for the San Francisco system. It is merely illustrative. I hope that we will be able to develop even better architectural standards for our stations, and other public areas. This is the type of thing that we would clear with the Commission of Fine Arts and the National Capital Planning Commission, and, in the case of the Capitol Station, we will coordinate

the design with the Committee for the Extension of the Capitol and the Architect of the Capitol.

Mr. DENTON. What is your schedule for the coordinating contract?

Mr. MCCARTER. That would be the first thing we would do. I would say after we get the appropriations cleared within a monthMr. DENTON. A month after the appropriation?

Mr. MCCARTER. Yes, we hope to execute this contract between October 15 and November 1.

Mr. DENTON. What is the current status of these negotiations? Mr. MCCARTER. We have been reviewing the qualifications of many architect-engineer firms and have had discussions with a number of firms and organizations.

On this, I want to be absolutely sure that the architect and engineering firm or firms that we select for this very important function have had sufficient experience and are the best qualified for the assignment.

Mr. DENTON. You have a lot of detail to work out yourself before you start hiring the architect. I don't think you can do that in a month.

Mr. MCCARTER. We will hire the architect or architect-engineer to develop the standards and criteria to be used in the final design.

Mr. DENTON. How long would it take you to issue the $1 million contract?

Mr. MCCARTER. That will be the first one to be negotiated.

Mr. DENTON. You have to work out your own details and issue that. How long will that take?

Mr. MCCARTER. We have said November 1.

Mr. DENTON. Is that a firm date?

Mr. MCCARTER. No.

Mr. LYON. This process will continue throughout the life of the project. In the development of standards, standard detail specifications

Mr. DENTON. You will not be ready by November 1.

Mr. LYON. We feel that contract can be initiated by that date and that by the final quarter of this fiscal year we will have developed enough in the way of the necessary standards in order to let the first design contracts.

Mr. DENTON. You have to let the coordinating contract before you issue the final contracts.

Mr. MCCARTER. On a certain section.

Mr. DENTON. How long will it take you to do that?

Mr. LYON. The entire process will continue throughout the life of the project, but for the six sections scheduled for initial design and construction the process will be far enough along by the final quarter of this fiscal year to let the first of the design contracts at that time. Mr. MCCARTER. We hope.

Mr. DENTON. How much will that first contract be, the first final design contract?

Mr. LYON. We contemplate letting six design contracts during the final quarter.

Mr. DENTON. On the first one how much will it be?

Mr. LYON. $400,000 estimated.

Mr. DENTON. How many final design contracts do you plan to let in 1966?