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Bus Regulation: A Unique Legal Specialty

By: Jerry A. Casser, Esq.

Published in “Transportation Law Update” – May, 1989.


Historically, bus transportation in the State of New Jersey
has been handled primarily by small family owned companies
which were handed down from father to son. About 60 years
ago, prior to the formal regulation of the intrastate bus
industry by any State agency, the main thoroughfares of each
municipality were serviced by individual operators, each of
whom owned a single bus and drove it himself.

The individual operators later formed associations with each
owner operator continuing to drive his own bus. The associations
developed coordinated schedules and devised receipt pooling
and collective purchasing arrangements. On many of the routes
served by the associations there continued to be individual
operators who remained independent of these groups, both financially
and operationally.

Some of the associations evolved into single companies by
the process of one operator buying up the interests of other
members of the association. However, in some areas such as
Hudson and Essex Counties, the association concept has continued
to the present time.

The Public Utilities Commission first acquired jurisdiction
over regular route intrastate bus operations in 1916. At that
time a two step process was required in order to obtain operating
authority for intrastate service. First, the proposed operator
was required to apply to each municipality covered by his
route for authorizations which were known as municipal consents.
An owner operator who desired to operate only a single bus
over the route would obtain a single municipal consent to
operate the bus over a specified route, two consents to operate
two buses, and so forth.

Once the municipality granted the municipal consent, the
consent would not become effective until and unless approved
by the Public Utilities Commission upon a factual determination
that there was a public necessity for the proposed service
and that the operator was qualified to render the service.

The requirement of municipal approval was eventually eliminated
in 1973, at which time all existing municipal consents were
“grandfathered” into Certificates of Public Convenience
and Necessity which are issued by the Department of Transportation
and are now the sole required authorization for intrastate
bus service in the State of New Jersey.

Throughout this entire period, the independent bus companies
have had to compete for passengers, first with Public Service
Coordinated Transport, and later, after its acquisition by
the State, New Jersey Transit. Nonetheless, these companies
have thrived by virtue of the need to be efficient and the
fact that they have generally conducted business in a limited
geographical area while NJ Transit’s operations have sprawled
over the entire state and have been fraught with the business
inefficiencies found in most bureaucratic entities. Unfortunately,
the need for the State of New Jersey to justify its presence
in the transportation business has stunted the growth of the
bus industry by overregulation.

Overregulation has created a climate for the bus regulation
specialty in the field of law. Before a privately owned bus
company can obtain new financing for its business, enter into
a lease for its business premises, adjust the rates which
it charges for riding its buses, change operating schedules,
serve recreational points such as Atlantic City’s Casinos,
transfer stock on its books to family members and other individuals,
sell business property which is no longer needed, merge with
another family owned corporation, or even terminate an unprofitable
business, prior approval from the Department of Transportation
is required.

In this morass of bureaucratic turmoil, a specialty has been
found, tenuous though it may be. Although there is ample opportunity
for an attorney to perform continuing legal functions for
his client, with all of the petitions, motions, and tariffs
required to be filed, hearings to be attended and just plain
business advice to be given, there have been hints virtually
every year that the privately owned bus companies will soon
be a thing of the past.

The condition of the bus industry in the State of New Jersey
is quite unstable today. While other states have turned to
public ownership of bus transportation, New Jersey has continued
with the private ownership of bus transportation for many
years. However, the seemingly unending spiraling of costs
has made it possible for only a few large companies and a
number of very small companies to operate profitably.

The program under which the State of New Jersey has been
purchasing buses for leasing to companies at $1 per year has
for the most part taken away the market for used vehicles
and severely depressed the prices of these vehicles, making
it difficult for the independent companies to upgrade their
fleets.

Under the laws of the State of New Jersey, a regular route
operator may not discontinue its service without first obtaining
approval from the Department of Transportation. Experience
has demonstrated that a threatened stoppage of service will
be met with substantial resistance by the State, with the
backing of the Attorney General and the Courts.

Similarly, a regular route operator must obtain approval
from the Department of Transportation for the transfer of
its regular route operating rights to another operator. Again,
experience has shown that the Department of Transportation
is reluctant to grant such approval, even in situations where
the acquiring company has demonstrated the capability of operating
the service in a satisfactory manner.

Accordingly, a bus operator cannot merely walk away from
an unprofitable route, and has virtually no market for its
disposition. Frequently, the only choice available to the
operator is to declare bankruptcy or abandon all intrastate
operations.

But for the apparent rejuvenation of the industry in the
last 15 years because of the opening of the Atlantic City
market, many bus companies would have gone out of business.
As it was, approximately a dozen longtime bus operations have
closed their doors since 1983, and several more have substantially
curtailed their operations.

A new deluxe motorcoach today costs upwards of $225,000.
Liability insurance coverage is exceedingly expensive and
not always available. The type of financial investment needed
to start up or continue a bus company is beyond the means
of most people. The period of time needed in order to comply
with most of the State imposed regulations is equally staggering.
Bureaucratic delay often means that the period of time necessary
to obtain an increase in bus fares is one year or more, with
the bus company losing money in the interim.

The period of time to obtain a new bus route or obtain initial
charter approval can take from three months, if uncontested,
to two years, if contested by another carrier. In this situation,
the less experience the attorney has in this field, the longer
the wait, for there are many obstacles to be found along the
way. Not only must the attorney deftly maneuver around the
State’s regulations, but he must also engage in an adversarial
proceeding with the attorneys for competing companies.

Sometime soon, it has been said, the transportation business
in the State of New Jersey will be placed entirely in the
hands of the State owned NJ Transit. Additionally, there have
been rumblings that “deregulation” will eliminate
most State oversight of the transportation industry, much
in the manner that Federal “deregulation” has eliminated
most of the Federal oversight. If so, there will no longer
be a need for a transportation attorney in this State. I have
been living with this threat for the past twenty years, and
as each year passes, I breathe a sigh of relief.

Several years ago, the State enacted legislation that has
reduced the delay in granting small fare increases and at
the same time has generated new work for transportation attorneys.
The State annually sets a “zone of rate freedom”
within which a bus company can adjust its fare structure without
the usual administrative hearing process.

This has generally increased the number and frequency of
fare increase filings and tariff changes creating some additional
opportunities for a transportation attorney to serve his clients.

I am a believer in the free enterprise system. We have seen
the death of the corner grocery store in favor of the large
supermarket. Many small family businesses in the urban areas
of the state have closed in the face of competition from the
large suburban and highway malls. The small bus companies
live on and should continue to do so.

As an attorney, I have a great deal of pride in practicing
my profession. Even more than that, I enjoy the opportunity
to preserve the privately owned bus companies for what they
are, efficient local businesses which provide competitive
service, competitive prices, and in many cases a community
flavor. If the service is not good, if the prices are not
competitive, if the buses are not clean or the drivers courteous,
there is always another company ready and willing to serve
the public. If there were one State owned company, would this
be true?

What I am seeking is a greater understanding of the bus regulatory
field. With this understanding will come the entrance of additional
attorneys into the field who will have a similar interest
in modifying the existing legislation and in upholding the
private sector against further incursions by the government.


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