Loophole allows unsafe tour buses on highways.

Tour buses that the California Highway Patrol has deemed unsafe are still carrying passengers from California to points outside the state.

Differences in the way state and federal transportation agencies conduct their inspections allow buses that have lost their state licenses to continue operating with a federal license, the San Diego Business Journal has learned.

This means that buses that are considered unsafe by state officials cannot carry passengers from point to point in California; however, if they have a federal carrier license, they can transport riders from a California city to a destination outside the state.

Two tour bus companies that operate out of San Diego, Mexicoach Inc. of Tijuana and Arrowbus Inc., have lost their license from the California Public Utilities Commission. Yet Mexicoach and Arrowbus still legally operate tours between San Diego and Las Vegas. Mexicoach also runs daily tours between San Diego and Tijuana and Rosarito.

Mexicoach lost its PUC license a year ago after it failed California Highway Patrol inspections. Arrowbus lost its PUC license in February because of inadequate insurance, according to the PUC. Arrowbus' last CHP inspection, on Jan. 16, showed that its terminal rated "unsatisfactory" because of an inadequate bus maintenance program and inadequate drivers records, according to the CHP.

The California Highway Patrol conducts actual inspections and turns over its recommendations to the PUC, which licenses tour bus companies that run intrastate trips.

The CHP inspects every bus company with a terminal in California every 13 months. Buses that do not pass inspection are ordered out of service, and the owner is not allowed to operate the bus until all the necessary repairs are made. However, the CHP does not automatically follow up to ensure the bus has been repaired to standards, and the owner is on the honor system to make the repairs.

During its last inspection of Mexicoach, conducted on Nov. 16, 1990, the CHP found 62 violations in three categories -- brakes, tires and steering and suspension. Nine of Mexicoach's 11 buses were targeted in the inspection, the second consecutive inspection the company failed last year. One CHP interoffice memo stated Mexicoach's continued operation would present "an imminent danger to public safety."

Mexicoach vice president Alfonso Hernandez said he has since brought his company up to CHP standards in terms of driver qualifications and the mechanical condition of its buses. He said he will soon apply for a PUC license so he can run trips from point to point within San Diego and other areas of the state.

Arrowbus manager Fred Wallace said he could not comment because of pending litigation against him. The state has sued Wallace for allegedly operating intrastate trips without a PUC license. In court documents, Wallace has denied the charge and claims that the CHP is treating him unfairly.

"When (the CHP) found out I was associated with Arrowbus, they started harassing (the company)," Wallace said last week.

Wallace is past owner of two other bus companies that went bankrupt. Both companies had numerous safety problems, according to the CHP.

Mexicoach and Arrowbus are just two of many tour bus carriers statewide that have lost their right to carry passengers from point to point within California but continue to operate interstate trips with a federal license. These licenses are issued by the federal Interstate Commerce Commission. The Office of Motor Carriers, a branch of the Department of Transportation, conducts the federal inspections.

It's a situation that often frustrates state officials at the California Highway Patrol and the Public Utilities Commission.

"If we determine a carrier is unsatisfactory to the degree the company's authority is suspended or revoked, we would be very pleased to see that carrier's interstate authority suspended. If the vehicle is unsafe, it's unsafe," said Linn Holmes, manager of the CHP's Motor Carrier Safety Program, based in Sacramento.

The bottom line is that the federal government relies heavily on a company's own records, not necessarily the actual mechanical condition of its buses. That worries CHP inspectors. For example, they noted in two separate safety inspection reports on Mexicoach last year that the company's maintenance and repair records did not match the true condition of its buses.

In general, federal inspectors base their tour bus company ratings on a review of drivers' records, drug testing records and bus maintenance reports.

"We don't generally crawl under buses unless we get a specific complaint from the public or from the CHP," said Ronald Hoffman, state director of the Office of Motor Carriers for the Southern California region.

Hernandez of Mexicoach said federal inspectors didn't crawl under his buses.

"The (federal inspectors) were here earlier this year, but they went through our records -- it was only paperwork," he said. "I don't recall them ever doing a mechanical inspection. The CHP does that."

Once a company receives a satisfactory rating from federal officials, Hoffman said, inspectors will not return for at least two years, barring specific safety-related complaints.

The federal inspections confound not only state officials; some local tour bus operators are frustrated as well.

"The (federal) inspections for bus companies are almost non-existent -- it's a random deal," said Robert Berkstresser, director of operations for Grayline Tours Inc. and Goodall's Charter Bus Service Inc. in San Diego. "Since 1984 they've been here once, and they look for compliance with federal regulations. They do not go out and inspect the vehicles; they look at records. If you have a piece of paper saying you've done your maintenance, everything is cool."

Because the CHP does not do follow-up inspections on companies that have lost their state license, both Mexicoach and Arrowbus currently have unsatisfactory terminal ratings with the CHP. However, both have a top rating of satisfactory with the federal Interstate Commerce Commission.

Mexicoach was recently cited by the PUC for operating buses that were not registered with the state. Even buses operating on a federal license must register with the PUC to prove they have insurance while operating on state roads.

In April 1990, a PUC investigator from the agency's San Diego office slapped Mexicoach with a $1,000 fine for allegedly carrying passengers on intrastate trips, which require a PUC license.

And last week, two Mexicoach vehicles, one bus and one tour van labeled Five Star Tours, displayed the company's now-invalid PUC license number. Displaying an invalid PUC license number is a misdemeanor offense punishable by not more than $500, according to the California Code for public utilities.

Hernandez of Mexicoach explained that tape had been placed over the invalid PUC numbers on his buses and that the tape must have fallen off on some of the vehicles.

Meanwhile, Mexicoach's federal operating license has never been suspended or revoked, said Philip Yallowitz, a supervisory special agent with the commission.

Like Mexicoach, Arrowbus has never had an interruption in its federal license. The federal Office of Motor Carriers reports that it gave Arrowbus a satisfactory rating in April 1990. At that time, Arrowbus had another owner.

CHP records show that Fred Wallace and his wife Rose run Arrowbus Inc., which currently is advertised as C.B.L. Tours. It offers trips from San Diego to Las Vegas and Laughlin, Nev.

Wallace was sued in June this year by the state for allegedly running intrastate trips. This violated a previous court order banning Wallace from intrastate operation. The district attorney's office is seeking up to $75,000 in civil penalties. The matter probably will be discussed privately by both sides before a judge by the end of the year, said Deputy District Attorney Donald H. Canning.

Wallace is the former owner of California Stage Lines, which according to court records filed for bankruptcy in 1988. He also owned California Bus Lines, which lost its PUC charter party and round trip sightseeing permits in 1988 and 1987, respectively, according to court documents. That company went bankrupt in 1990, Wallace said. He blamed heavy state regulation for the demise of both of his companies.

California Bus Lines' federal operating license was revoked in March 1990, according to the Interstate Commerce Commission, for failure to provide proof that it had proper insurance.

Wallace said last week that his brother purchased Arrowbus Inc. in August 1990. The Wallaces assumed a federal operating license when they bought the company.

The first CHP safety inspection on file for Arrowbus under Wallace's ownership is dated Jan. 16, 1991. It shows an unsatisfactory rating because of an inadequate maintenance program and numerous equipment violations.

For their part, state and federal officials said they are making an effort to resolve the differences in the rating systems applied to tour buses. Recently there has been more communication between the bureaucracies, they said.

One problem, however, is that the Interstate Commerce Commission and the Office of Motor Carriers operate with apparently severely limited staffs.

"We need more people," said Hoffman at the federal Office of Motor Carriers. The Southern California region of the Office of Motor Carriers has eight inspectors to cover all interstate busing and trucking in the southern half of the state.

Similarly, Yallowitz of the southern region of the Interstate Commerce Commission said "we're damn busy." When asked if his staff of three investigators was adequate to properly investigate all of the carriers, Yallowitz declined to comment.

The Interstate Commerce Commission's southern region comprises nine counties, including San Diego, Orange and Los Angeles counties.

Nicholas Walsh, administrator of the San Francisco region of the Office of Motor Carriers, said some of his investigators will begin working with the CHP so that each agency can learn about the other's bus terminal rating methods.

"We're not really at odds with the CHP on this," he said. "We're looking at what they do, and maybe we should consider vehicle maintenance to be a bigger factor. The CHP has one of the nation's most aggressive bus and truck safety programs. They're in the forefront."

Holmes of the CHP was less than optimistic when asked if he thinks the discrepancies in ratings of tour bus carriers by state and federal agencies will be resolved soon. "Personally, I don't think there will be much change in the future unless a carrier crashes and a bunch of people are killed -- that might throw some weight down."