The Democratic Central Committee et al., Petitioners, v. Washington Metropolitan Area Transit Commission, Respondent,d. C. Transit System, Inc., Intervenor, 485 F.2d 847 (D.C. Cir. 1973)

This petition challenges two orders of the Washington Metropolitan Area Transit Commission by which D. C. Transit System, Inc. (Transit) was empowered to temporarily increase certain of its fares for transportation of passengers in the District of Columbia and its Maryland suburbs. In the first order, No. 880,¹  the Commission concluded that Transit needed an upward adjustment of fares to avoid heavy financial losses during a 44-day period; and in the second, No. 882,²  the Commission set fares calculated to produce additional revenues in that period. After careful study of petitioners' contentions against the backdrop of the administrative record, we perceive no error in the Commission's action. We accordingly affirm the orders under review.

* On July 17, 1968, Transit filed an application seeking approval of increases, to become effective August 18, in some of its fares within the District of Columbia and Maryland, and between points in those areas, as specified in revised tariffs accompanying the application.³  On August 15, the Commission suspended the tariffs pending its investigation into the reasonableness of the proposed fares⁴  and thereafter, between August 26 and September 13, conducted a series of public hearings at which that matter was extensively explored.⁵  On October 18, the Commission issued Order No. 880 in which it identified the circumstance which became crucial to its resolve to permit a fare raise. The Commission found that Transit had lost some $880,000 during the first seven months of 1968 and that, at the existing fares, it would lose almost $2.8 million more in the future annual period.⁶  On that basis, the Commission concluded that the fares in force were unjust and unreasonable, and that an increase was imperative.⁷ 

It so happened, however, that ten days prior to Order No. 880 our Williams⁸  and Payne⁹  decisions were announced. In Williams, we set aside two of Transit's fare orders and remanded several issues for further consideration by the Commission, some of which envisioned the posibility that Transit would have to make restitution of sizable sums to its riders.¹⁰  In Payne, we upheld fares erected by two other orders but remanded for additional study an issue as to whether Transit's fare scheme was discriminatory.¹¹ 

In Order No. 880, the Commission felt that, as far as possible, it should take those decisions into account before disposing of the proceeding before it,¹²  and to the limited extent deemed feasible it undertook to do so.¹³  The Commission also felt, however, that most of the Williams-Payne remands required study extending beyond the time at which Transit should obtain some relief.¹⁴  Considering, on the one hand, that the inadequacy of Transit's current fares necessitated higher fares and, on the other hand, that Transit might have to refund a substantial sum to the traveling public, the Commission concluded that it would be appropriate to raise Transit's fares enough to enable it to cover its operating expenses and debt service but, pending completion of its studies of the remanded issues, not a return on equity.¹⁵  Since the tariffs filed by Transit expectably would yield revenues above that point, Order No. 880 set another public hearing at which interested parties might submit proposals for a fare structure that would generate revenues at the break-even level.¹⁶ 

The supplemental hearing was held on October 25, and four days later Order No. 882 issued. It prescribed, on an interim basis, fare raises designed to absorb Transit's operating expenses and debt service but not to accommodate any return on equity.¹⁷  The interim period extended through December 13, the 120th day after Transit's new tariffs were first suspended-the maximum period the Commission was authorized to suspend a tariff.¹⁸  In this fashion the Commission, consistently with the approach adopted in Order No. 880, held the line on profit-making while it dealt with the issues committed to it by the remands.

Petitioners sought reconsideration of Orders Nos. 880 and 882 on grounds which included those later discussed herein. On October 31, the application for reconsideration was denied,¹⁹  and the petition for review by this court followed.

II

Petitioners' first complaint is that Orders Nos. 880 and 882 reflect a failure by the Commission to give Williams²⁰  and Payne²¹  the consideration and respect they were due. The grounds tendered in support of this position are several. Petitioners charge that the Commission was preoccupied with Transit's cash flow predicament, and gave only superficial attention to the substantial benefits accruing to the busriding public in consequence of those decisions. Petitioners argue that substantial sums of money were due farepayers in consequence of Williams,²²  and these sums, it is stated, would offset any loss which Transit might suffer for want of a more immediate fare increase.²³  Petitioners suggest that, since when the decisions were rendered two months of the statutory suspension period²⁴  remained, the Commission acted too hastily in not utilizing that time for a more careful inquiry. Petitioners contend further that there were explanations for Transit's chronic cash shortages which the Commission might have profitably explored, but which, they assert, the Commission chose instead to ignore.²⁵  Petitioners also point out that the orders were formulated without the study called for by our remand in Payne, and that, they say, was error.

Our starting point is the Commission's decision itself. Confronted, in the midst of its investigation of Transit's application for a fare increase, with the Williams and Payne decisions, the Commission perceived three courses available to it:

One option open to us is to take no action in this case between November and December 13, 1968, the date by which we are required to act. . . . The substantial losses being suffered by the company daily make that possibility unwise. Another option would be to ignore the court opinions until the cases are officially remanded to us and decide this case as though they had never been handed down. We regard the opinions as being entitled to more consideration than that. Finally, there is the option we choose to follow-to take interim action in this case while we await developments resulting from the court decisions.²⁶ 

Elucidating this choice, and addressing the question whether the prospect of a refund pursuant to Williams should impact an interim increase, the Commission said:

We do not know at the present time how much will ultimately be placed in the riders' fund. There are many complex questions to be resolved and we are disinclined to dispose of them precipitately. Meanwhile, the evidence in this case, which is practically undisputed, makes it perfectly clear that the revenues being produced by the present fare structure will fall far short of covering operating expenses and debt service in the future annual period, much less provide a profit for the owners. Continued operations in this state of affairs could at some point drive the company to the point where it is simply unable to continue to operate.

We find our answer to this dilemma in one fact. Even if we knew with precision right now the amount to be placed in the riders' fund, we would not consider it wise policy to apply that fund in such a manner as to reduce revenues below the level of operating expenses and debt service. To do so would simply be to invite a deterioration in the quality of service, to impair our ability to require service improvements, and to precipitate an eventual transportation crisis with unjustifiable hardship for the riding public. We are saying, in other words, that the wisest use of the riders' fund is to eliminate return to the equity holders until such time as full restitution is made of the amounts which the court has held were improperly obtained from the riding public.

This being so, it is entirely consistent with the court's decision to issue an interim decision in this case whch makes those changes in the rate structure which are necessary in order to produce revenues sufficient to cover operating expenses and debt service while we consider what further action is required in light of the court opinions.²⁷ 

With respect to the study directed in Payne, the Commission felt that

. . . the court's approval of our interim [o]rder . . . in [Payne] lends support to our view of this problem. The court has clearly expressed its own concern with the deleterious consequences of forcing the company to operate at a loss and has recognized our power to deal with the problem on an interim basis.²⁸ 

The Commission's reference to Payne brings to mind what we said there:

The case will therefore be remanded to enable the Commission to conduct [the required] study. We wish to make clear, however, that we do not view our holding in this regard as requiring that the rate increases ordered by the Commission be rescinded, and we leave the matter of any immediate fare adjustments to the Commission's discretion. For though we have rejected the Commission's reasons for refusing to inquire further into the question of fare discrimination, we do not think the circumstances required that the rate increases requested by Transit be delayed until such an inquiry could be made. We note especially that considerable time had already been expended in the Commission's effort to deal conscientiously with the fair return issue, and that, as found by the Commission's Interim Order, Transit had urgent need for higher fares. Moreover, though the issues raised by petitioners were, in the context of the Commission's past regulatory practice, novel and farreaching, they were not raised until the final stages of the proceeding. For these reasons we think the Commission, balancing the possibility of unfairness to particular customers or classes of customers against the company's immediate need for increased revenues, might have deferred consideration of the questions relating to discrimination while granting Transit's request for a fare increase. And we hold that it is within the Commission's discretion to follow that course on remand.²⁹ 

We turn now to examine petitioners' objections to the Commission's disposition of the matter. We need not consider whether the Commission's reasoning would support a permanent higher-fare order promulgated under circumstances conducive to deliberate action,³⁰  for the context of Orders No. 880 and 882 clearly was not of that character. Rather, it closely paralleled the milieu which we discovered in Payne. There, like here, the Commission had made an unchallenged finding that Transit would sustain a large net operating loss at then prevailing fares.³¹  There, like here, the deficit would have jeopardized Transit's financial health, and in consequence would have threatened a deterioration in the quality of its service.³²  And there, like here, the Commission issued an interim break-even order because formulation of a permanent order would have required a considerable amount of time.³³  We sustained the order against the contention that the findings underlying it were inadequate.³⁴  We held that the Commission

. . . was not required to make the full and complete findings as to margin of return and fare structure that must accompany an exercise of its authority to prescribe permanent rates. This is not to say that its discretion must not be exercised rationally, nor that it may act without making relevant findings, supported by the record, to sustain its action. We hold, however, that given the circumstances presented here-the inadequacy of the record and the need for further inquiry, the danger of serious consequences to Transit and the public if no fare increase were granted in the interim, and the undesirability of imposing unreasonably high fares on the public-the Commission's solution was within the bounds of its authority and supported by the findings it made.³⁵ 

In the present case, as we have stated, the Commission found that existing fares were unjust and unreasonable because Transit had already lost more than $880,000 within a seven-month era and stood to lose almost $3 million more during the future annual period.³⁶  Not in the least are these stark facts disputed by petitioners;³⁷  their position is that the deficit could have been absorbed without resort to a fare raise.³⁸  But as the Commission emphasized, " [c]ontinued operations in this state of affairs could at some point drive the company to the point where it is simply unable to operate;"³⁹  and to deny Transit sufficient revenues to meet its operating expenses and pay interest on its debt obligations "would simply be to invite a deterioration in the quality of service, to impair [the Commission's] ability to require service improvements, and to precipitate an eventual transportation crisis with unjustifiable hardship for the riding public."⁴⁰ 

The great difficulty, from the Commission's viewpoint, was that delay in affording Transit some measure of relief was incompatible with the interests of the carrier and the traveling public. Although it was probable that Transit's busriders were entitled to refunds under our decision in Williams, the Commission, in Order No. 880, pointed out that it did "not know at the present time how much will ultimately be placed in the riders' fund,"⁴¹  and that " [t]here are many complex questions to be resolved and we are disinclined to dispose of them precipitately."⁴²  Quite understandably, then the Commission felt that "the wisest use of the riders' fund is to eliminate return to the equity holders until such time as full restitution is made of the amounts which the court has held were improperly obtained from the riding public."⁴³ 

In addition to the time needed to work out the problem of possible restitution which Williams posed for the Commission, time was also needed for Transit to seek review of that decision. When Order No. 880 issued, the Commission knew that Transit had already asked this court for a stay of the mandate.⁴⁴  We granted the requested stay, and Transit applied to the Supreme Court for certiorari.⁴⁵  As we were later to observe, the "issue [before the Commission] was hedged with uncertainty because of the pendency of the petition for certiorari in Williams, and . . . the course of action urged by petitioner might well have resulted either in the transit stoppage which the Commission was seeking to avoid, or in another series of complex legal problems."⁴⁶  We also are advertent to the fact that the interim increase under review was to endure for only 44 days, and that the Commission had already begun preparation for responding to the Williams and Payne remands.⁴⁷  We perceive no basis for overhauling the Commission's judgment that postponing relief for Transit until these efforts had run their course was not in the best interests of either the carrier or its passengers.⁴⁸ 

For similar reasons, we believe the Commission remained well within its regulatory authority when it selected the interim increase in preference to deferment of relief pending the study for which we remanded in Payne. It had to be fairly evident to all concerned that a good deal of time would be required for the study which Payne envisioned-perhaps more time than stable fares beset by rising costs could bear. Indeed, in our Payne opinion, we explicitly committed to the Commission's discretion the question whether the fare increase there authorized should be stayed until the study was made.⁴⁹  In Order No. 880, the Commission correctly read this action as an expression of "concern with the deleterious consequences of forcing the company to operate at a loss,"⁵⁰  and as a recognition of the Commission's "power to deal with the problem on an interim basis."⁵¹  As the Commission added,

The court's views on this problem make it perfectly clear that, without denigrating the importance of the cost study, a clear showing of need lays the foundation for fare adjustments on an interim basis prior to completion of the cost study. We find that the financial situation of the company . . . does establish a need for action now.⁵² 

We have no cause to disturb that finding. We hold that the Commission did not exceed its power or its discretion in declining to defer temporary relief for Transit in favor of completion of the remands in Williams and Payne.

III

The projections underpinning the fares authorized by Order No. 882 included $35,695,256 in passenger revenue, exclusive of the schoolfare subsidy, and $34,367,584 in operating expenses.⁵³  As in other ratemaking proceedings,⁵⁴  the Commission was sensitive to the phenomenon that higher fares are normally accompanied by a proportionate drop in ridership,⁵⁵  and it had good reason to be.⁵⁶  Petitioners argue with declining ridership comes declining cost of operation, and that the Commission failed to match the two in setting the new fares.

At the hearings, the protestants presented a witness who expressed the view that Transit's request for higher fares omitted recognition of savings that could result from a reduction in service made possible by the expected fall in ridership.⁵⁷  The witness thought that maintenance costs might be lowered and some trips eliminated,⁵⁸  but the Commission disdained these suggestions. "Reducing the level of maintenance," it said, "will only result in a lessening of the caliber of vehicle on the streets. . . . We feel that Transit's maintenance efforts in the future should be expanded, not restricted"⁵⁹  Moreover, the Commission added, "fare resistance does not show up on one particular trip or even one particular line. Such resistance is general in nature and in practically every instance takes place throughout the system rather than on a particular trip or line."⁶⁰  Thus the Commission felt that there was no significant relationship between the projected decline in Transit's ridership and the expenses of operating Transit's system. Petitioners contend that the Commission, in doing so, accorded too little weight to the witness' testimony.

In exercising its ratemaking function, the Commission was under an obligation to take into account any economies that the carrier could effect, and any that were probable from a decreased ridership.⁶¹  We do not, however, regard the Commission's rejection of the witness' testimony as a default on that score. The witness admitted that he was too unfamiliar with the industry and with Transit as a carrier to pinpoint specific costs which might drop with a drop in the number of riders;⁶²  his observations concerning maintenance and service cutbacks were voiced simply as suggestions.⁶³  The Commission bore a responsibility, coequal with the responsibility to hold fares down, to sustain the efficiency and adequacy of Transit's service.⁶⁴  Reduced maintenance and fewer trips are obviously inconducive to superior transportation.

Beyond that, the broad thesis that a smaller ridership for Transit is wedded to smaller operating costs for Transit was disputed before the Commission. Another witness, Transit's senior vice president in charge of operations, testified that any ridership decline occasioned by resistance to higher fares would, as the Commission said,⁶⁵  be likely to be diffused over the entire transportation system-a few passengers less per trip, but not fewer enough to enable curtailment of the frequency of trips on any given route. The witness further testified that Transit's constant traffic checks had not disclosed any loss of passengers sufficiently concentrated to justify any substantial reduction in service.⁶⁶ 

Were this all to the matter, we would be obliged to accept the Commission's action, for the choice between particular items of conflicting evidence on issues within the Commission's area of expertise was peculiarly one for it to make.⁶⁷  We would be justified in upsetting the choice only if it were irrationally made,⁶⁸  and, measured simply by the testimony of the two witnesses, that would not be the case here. As we said in Payne, "it is not a valid objection that conflicts of the evidence might conceivably have been resolved differently, or other inferences drawn from the same record."⁶⁹ 

But the inquiry is not necessarily ended by the Commission's pick from the conflicting testimony of the two witnesses, for there would remain the question whether the Commission should have probed deeper before coming to a conclusion. Surely if Orders Nos. 880 and 882 had established higher fares on a permanent basis, the Commission's treatment of the relationship between cost savings and proper fares might not pass muster.⁷⁰  We think, however, that in the circumstances confronting the Commission, there was ample basis for what it did here.

We have already pointed out that in fashioning interim orders the Commission "was not required to make the full and complete findings . . . that must accompany an exercise of its authority to prescribe permanent rates."⁷¹  True it is that "its discretion must . . . be exercised rationally,"⁷²  and it must make "relevant findings, supported by the record, to sustain its action."⁷³  But the important point is that the action which must be sustained here is not the specific treatment of particular ratemaking factors-that is, not the treatment as a treatment on the merits-but rather the propriety of granting interim relief pending fuller consideration of the fare-increase application on the merits.⁷⁴  So measured, Orders Nos. 880 and 882 survive the test.

In Yohalem v. Washington Metropolitan Area Transit Commission,⁷⁵  we dealt with a cognate problem. There, similarly to the situation here, an order fixing higher permanent fares⁷⁶  was challenged on grounds that the Commission had failed to adequately weigh the possibility that variable costs would drop with a dropping ridership, and that it had failed to explore service cutbacks and other alternatives before raising the fares.⁷⁷  We held that the Commission was not required to delve into those matters prior to promulgation of the orders there under attack.⁷⁸  We noted that "an inquiry into the relationships among costs, ridership levels, and service cutbacks raises a host of complicated factual questions,"⁷⁹  which the Commission would have had to investigate de novo⁸⁰  and at a time when "the status quo placed D. C. Transit in an intolerable financial position."⁸¹  We observed that "it would be a strange interpretation of the public interest which encompassed the likelihood that the Commission would be holding hearings on the issue of whether some routes had become sufficiently unprofitable to warrant cutbacks in service, while creditors forced the company into a total shutdown."⁸²  We declared, too, "that considerations of administrative efficiency required that the questions concerning possible service reductions be resolved in a context more conducive to unhurried and informed deliberation than the crisis atmosphere which prevailed in the instant proceedings."⁸³ 

It goes without saying that what suffices for a permanent fare order does equal service for an order setting fares just for the limited time required for a full examination of critical aspects of a fare application on the merits. The conditions prevailing when Orders Nos. 880 and 882 were fashioned were no less pressing than those existent when the orders addressed in Yohalem and Payne were promulgated. As the record before us vividly portrays, there was, as in Yohalem, "the serious threat of emergency"⁸⁴  consisting, as both there and in Payne, in "the danger of serious consequences to Transit and the public if no fare increase were granted in the interim. . . ."⁸⁵  And no more here than in those cases can we say that the Commission erred in granting Transit a raise enabling it to break even on its operations for the 44-day interim period.

The orders presently under review are accordingly

Affirmed.