The Northwoods Transit Commission violated a federal transit rule that governs the commission's provision of charter services when it provided shuttle transportation for the Country Rocks Autism concert in September, the state Department of Transportation has confirmed to The Lakeland Times.
The transit commission provided the service for two days - Sept. 13 and 14 - and was paid approximately $1,300 by the Howard Young Foundation. However, publicly subsidized services such as the transit commission are required by federal regulation to notify private-sector entities of the transit commission's interest and give those companies an opportunity to provide the service instead.
By rule, according to a Federal Transit Administration (FTA) presentation, once an eligible private entity is notified by the transit commission and the private company expresses an interest in providing the service, the public transit system is prohibited from providing the service.
In this case, said Chad Reuter, a DOT transit section lead worker, the transit commission made no notification at all. The DOT was following up on a complaint filed by StarGazer Limousine & Ride Service.
According to the FTA, the regulations are intended to protect private charter operators from unauthorized competition from FTA grant recipients.
"In essence, the charter regulations were implemented to ensure that transit agencies, subsidized with federal money, do not unfairly compete with privately owned bus companies," the FTA states. "Under the charter rules, with limited exceptions, local transit agencies are restricted from operating chartered services."
As a result of the violation, Reuter said no federal funds will be given to Northwoods Transit for the event and that further violations could have more serious ramifications.
"I have notified Roger (Northwoods Transit Commission manager Roger Youngren) that failure to follow the charter regulations may result in reductions or total loss of future federal operating assistance, which could lead to the loss of public transit service in the two-county area," Reuter said.
In an email to The Times, Reuter said the transit commission meant no harm.
"The commission was simply trying to provide service to the community for a well-respected nonprofit entity who has supported transit in the area," Reuter wrote. "I explained to Roger that the service should have been advertised to all private transportation entities in the area. Northwoods has followed those regulations for other events over the past two years, but consistency is required per FTA regulations."
At this week's transit commission meeting, Youngren said he had been misinformed about the rules and admitted the transit commission was in the wrong. Echoing Reuter, he also said the commission was trying to help a nonprofit organization that had donated to the commission to get a good deal.
"We wanted to do it for Howard Young because of our partnership with them, them giving us a $10,000 donation this year," Youngren told the commission board. "We didn't want to say no. We went back and forth on the price a little bit. We lowballed it. We made it happen."
Private sector frustrations
It's precisely that aspect of "lowballing" it, as well as not following the rules, that concerns Rich and Carrie Linzmeier, the owners and operators of StarGazer. For the Linzmeiers, the transit commission's move into the charter service arena isn't fair to them or to other private companies, isn't fair to taxpayers, and isn't fair to the vulnerable populations that the transit commission is supposed to serve.
"The issue that we have is that Northwoods Transit is always going to be able to underbid StarGazer and any company like ours because we have to charge a rate that can not only pay all of the bills associated with providing the service, but we have other bills that we have to cover, being a private business," Carrie Linzmeier told The Times last week in an interview. "There is reinvestment into the company, for instance. Northwoods Transit doesn't have to worry about any of that, so we will never be on the same playing field. Ever."
Indeed, this year the transit commission is purchasing four new buses, of which 80 percent of the purchase price is paid for by grants. It doesn't work that way in the private sector, says Rich Linzmeier.
"They can get these buses through the taxpayers," he said. "They also got a loan and in three months had it paid off. We're financing vehicles for that kind of value and higher, and we have to pay these things for years before they are paid off."
It's wrong for taxpayers, too, the Linzmeiers say.
"The board of the transit commission is making the decision for the taxpayers what direction those dollars are going to go, rather than just to the general public," Carrie Linzmeier said.
Rich Linzmeier said he raised a related question with the DOT in making the most recent complaint, addressing Reuter's claim that the transit commission was just trying to help out a worthy nonprofit.
"I also agree that the Howard Young Foundation is a well-respected nonprofit entity in our area, which is why we would have liked the opportunity to see if we could have come to some agreement, but I am confused," he wrote. "Should the transit be doing these services for nonprofit groups at all? Does this not set a precedent to serve all area nonprofit groups? .... Should federal grant dollars that are supporting Northwoods Transit be going to fundraisers supporting specific private entities, despite how worthy they may be?"
There's also at least the appearance of a "pay-to-play" conflict when the transit commission brokers good deals for private groups that donate to the commission, the Linzmeiers say.
"I'm not accusing them of anything but they need to worry about what it looks like and, being that they are in a political situation, they should be thinking of those things," Carrie Linzmeier said. "These issues continue to arise with nonprofit organizations. As far as I am concerned, it's a slippery slope because if you're doing these services for an organization, although they are well respected and honored in the community and doing great things, but they are a donor to your organization, does that not set a precedent when you are serving any nonprofit organization that you need to do the same for another in the community because otherwise it may show favoritism? I see the transit as putting themselves in a situation where they can't support all the nonprofits that are going to come knocking on their door."
Rich Linzmeier says he not against the transit commission because there is a vulnerable population to be served, but he said that's not the mission the transit commission is pursuing with its foray into charter services.
"I do want to clarify that there were rumors going around that I am against the transit commission. No," he said. "I am not against the transit itself. It's how they are operating it and interfering with private industry and I am not just talking about our company but all the companies in the area. There used to be nine different companies in the area. We're down to four companies up here that now operate for SMV (specialized medical vehicle) and that's not fair. For them to interfere like this, that is totally wrong."
Not the first time
Despite Reuter's assertion that Northwoods Transit has followed the regulations in the past, this is not the first time the commission has been warned about breaking the rules or has been involved in a controversy about providing services to private entities and "lowballing" the private sector in doing so.
A transit commission contract with the Lakeland Union High School Nordic ski team to provide transportation to and from Minocqua Winter Park also sparked controversy in 2017. Normally, providing that service would require adherence to the FTA charter rules.
Some time in the spring or summer of that year, the ski team and the transit commission began talking about a charter service to transport the team to and from ski practice Monday through Friday with pick up every day at 3:30 p.m. from LUHS and return between 5 p.m. and 5:30 p.m. to the school parking lot.
However, no formal contract was negotiated until much later, in October, and the transit commission did not notify private businesses of the plan until that time. When StarGazer expressed an interest, the DOT informed the transit commission it could not provide the service.
The problem was, StarGazer could not compete with the heavily subsidized transit commission's offer to provide the service for $1,170 a month, a fact the DOT's Stephen Hirshfeld acknowledged in his email informing the transit commission it could not do the service.
"The charter rules have some gray areas, but basically they bend over backwards to make sure private companies aren't damaged by public transit, since - as Richard and Carrie [Linzmeier] seem to realize - it's not a level playing field," Hirshfeld wrote.
Then transit commission manager Jim Altenburg replied: "Ok Steve our poor people will always suffer for this but we will say no."
The incident raised a number of questions. For one thing, the Linzmeiers say they were made to look like the "bad guys" simply because they could not compete with a government-subsidized entity. For another, Carrie Linzmeier contested the idea that members of the ski team were "poor people," as Altenburg suggested.
"I find it very frustrating that we are made to feel that we are somehow at fault for the ski team now not getting service based on Jim's response - 'our poor people will always suffer for this but we will say no,'" Carrie Linzmeier wrote to Hirshfeld on Oct. 31, 2017. "I had no idea that this would be the result and we stated that. I am hoping that he did not tell them it was our fault, and this group is not low income or elderly. This is not very good cooperation on his part or the transit commission if this is how local businesses are made to feel if we cannot meet their pricing."
There is also the issue of whether the transit commission should have notified private companies after the very first discussion with the ski team, either in the spring or summer. The FTA rules require prompt notification of such entities after a public transit system is approached about providing charter service.
"The Charter Service Rule requires you to send the notification the day that you receive the charter service request, or by the following business day, if you receive the request after 2 p.m.," the FTA summery of the rule states. "We recognize that this is not always possible, particularly given that we ask our subrecipients to consult with WisDOT upon receiving a charter service request. Regardless, you should treat these requests as though time is of the essence."
According to Carrie Linzmeier, she said she was told by a ski team official that the club had reached an informal agreement with the transit commission in May or June of 2017; however, Altenburg, in an Oct. 31, 2017, email, characterized it as much more informal.
"This Lakeland Ski Team was originally talked about in passing this summer as a thought but didn't come to light till recently," he wrote.
Whether proper notification was made or not, in the end the commission found a way to provide the service with the DOT's blessing. At the commission board's Nov. 13, 2017, meeting, transit commission chairman Erv Teichmiller -whose granddaughter was on the ski team - announced that the DOT had given the commission the green light to do the service after all.
"Board chair said that we'll be able to do the pilot project in Minocqua with WisDOT blessing," the minutes state. "It will be run five days a week during our normal hours to Schlecht Lake and Winter Park. Program review at the end of February. The ski club is a nonprofit organization. WisDOT requires notification to other providers. StarGazer stated they agreed to provide the services, but can't compete with our cost."
The secret to getting permission was to allow members of the general public to avail themselves of the set routes back and forth to the high school.
"The pilot program was open to all residents of the area who wanted to access the ski hill, as opposed to a specialized trip just for the Nordic Ski team," Reuter told The Times this week. "Public transit systems are allowed to add routes to their service area that terminate at businesses if they advertise the route as being for the general public and also have pick-up spots in at least one public place."
At the time, when he notified the Linzmeiers of the pilot program, Altenburg said the idea had not come from him, though he backed it.
"This is not my doing and came from over my head but agree with it," he wrote to Rich Linzmeier on November 13, 2017.
As of press time, it is unclear how the transit commission advertised the routes to the general public, or how many members of the public used the routes in addition to the ski team, though The Times has asked the transit commission for that information.
To the Linzmeiers, it was an improper use of taxpayer dollars for a private group.
"Our concern with this entire thing was that it was not a good use of taxpayer dollars since it was truly a private team transport, and we felt that if the kids on the team could afford equipment, they or their parents could afford transportation," Carrie Linzmeier told The Times. "And even more concerning was the precedent this was setting and opening the transit up to having to take on more and more of these types of trips."
Boulder Junction complaint
In September of 2017, the Linzmeiers also filed a complaint with Reuter that the transit commission had contracted with the Boulder Junction Chamber of Commerce to provide shuttle buses for their Musky Jamboree event on Aug. 13, 2017.
"The Transit Commission provided four of their buses to shuttle tourists/festival goers into Boulder from various parking areas to attend the event for about eight hours," Richard Linzmeier wrote in a Sept. 21, 2017, email to Reuter. "Apparently, they only charged $25 per hour per bus, which was less than what Lakeland Bus had charged in the past for the same event."
Linzmeier said Stargazer was never approached.
"I can say that we would never only charge $25 per hour for a bus," he wrote. "That would not even pay for the fuel or the driver time. They also worked with the same chamber to do their shuttle service with two buses for the Boulder Triathlon event on May 20, 2017. Same cost of $25 per hour."
Linzmeier wondered how such service fulfilled the transit commission's charter.
"How is this public transit when it involves tourism and contracts and takes away business from existing companies that could easily have provided the service?" he asked.
In his response the next day, Reuter assured the Linzmeiers that the transit commission had been warned.
"We are aware of this situation and have let them know that providing that sort of service is not allowed in the future without following federal regulations on charter service," Reuter wrote to Linzmeier.
However, at this week's transit commission meeting, Youngren said the transit commission could in fact continue to provide those services with the DOT's blessing.
"I will say that if the event is in our grant for the current year, such as the Dragon Boat Festival, the triathlon, and that sort of thing, things we are currently doing and have done in past years, that's not going to be a problem because we've done them in the past and there's been no complaint," he said. "But for any new event - and this (the autism rocks concert) was truly a new event - we have to publicize it and put it out to the 47 people who can bid on it."
In an email to The Times, Reuter agreed with commission. While in 2017 he stated the commission could not provide "that sort of service" ... "in the future without following federal regulations on charter service," he now implied they were following those regulations after all.
The difference was, events such as Dragon Boat and the Boulder Junction triathlon are annual rather unique events.
"If communities have annual events that they [the transit commission] desire to be part of their regular transit service schedule, they [the transit commission] can include them as part of their budget for the year," Reuter said. "... Charter services are considered one-off events outside of the normal transit schedule."
But the events that in 2017 Reuter said he warned the transit commission about were already annual occurrences, not one-off events. Though The Times presented Reuter with that 2017 email, he did not address why his response was seemingly different then, though it could have been because the transit commission had not yet put them in its annual budget as a set annual service.
For the Linzmeiers, that is still troubling because the core issue - heavily subsidized transit companies providing services for privately sponsored events - is not addressed. Equally troubling, Carrie Linzmeier says, the transit commission always finds a way to get DOT approval, for the ski team as well as for events the DOT previously told the commission it could not do.
"The DOT says the charter service rules exist to ensure private business is not impacted or harmed by transit's ability to underbid all of our prices, but yet, time after time, these loopholes appear and it is 'OK' for the transit to provide the service," she said. "It is frustrating that the government says one thing and does another, and it's also disappointing that the transit continues to take advantage of these loopholes and cut out the option for any other private service to be involved in these events."
Usurping the market
Of particular concern is the movement of the transit commission into the charter arena after having already usurped the market for on-demand taxi service, the Linzmeiers assert.
"We are a perfect example," Rich Linzmeier said. "We used to do taxi in the Minocqua area. There was no room for two taxi companies any more so in 2017 we pulled out. We are no longer an on-demand service."
Now, Carrie Linzmeier said, the same thing is happening with charter as happened with on-demand service.
"Now we're seeing this infiltration once again with the charter service, which I had thought we had moved past," she said. "I don't understand why the DOT isn't more concerned about this. I don't understand why the DOT isn't more concerned with these interferences and these precedents that are being set."
At the end of the day, says Rich Linzmeier, both public transit and private companies have a place in providing transportation in the Northwoods, if only the transit commission will stay in its lanes.
"I know we cannot take care of everybody in this community, I'm not for that," he said. "I'm willing to work with my other affiliates in the area so that people can be taken care of. And if we can't do that, that's when transit should step in."
Rich Linzmeier underscored that point in a 2017 email to Altenburg.
"We are here for the community, too, and most of our daily customers are the same type of individuals you are serving," he wrote. "These charter requests are not necessities and should fall outside of the needs of health care transports and general access that are part of your transit mission."
Most of all, Carrie Linzmeier says, the transit commission should follow regulations.
"When I found out this most recent violation had occurred, I was shocked because I thought we had come much further than this with Northwoods Transit," she said. "I thought they understood the way charter services worked and understood that private industry needed to be contacted."
It's not like they weren't told about the regulations after past incidents, Rich Linzmeier said.
"They have been educated on this," he said. "They are well aware of the rules."
Richard Moore is the author of the forthcoming "Storyfinding: From the Journey to the Story" and can be reached at richardmoorebooks.com.
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