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Battered by spike in fuel costs, commuter bus operator and diesel provider face possible MTA lawsuits

A person fills a car with gasoline from a green pump
Photo by Sean Rayford/Getty Images.

Ron Dillon Jr.’s family has been in the chartered bus business for more than 100 years. His company, Atlantic Coast Charters, provides service to private groups, universities and government agencies. Until a month ago, he ran three commuter routes for the Maryland Transit Administration.

Now he’s facing a potential lawsuit, the result of his decision to quit one of his routes on a few weeks’ notice — a move he says was essentially forced upon him by economics and the agency’s refusal to help its contractors stay afloat.

The trouble began last spring, Dillon said in a recent interview, when fuel prices spiked following Russia’s attack on Ukraine. The monthly payments he was receiving were too small to cover his expenses — and he was headed toward bankruptcy.

“There’s no fuel escalation [clause] in the contracts that we’re under, so I basically was running unprofitable,” he said. “Every day I was losing money, and I needed some help.”

For months — from late spring through early winter — Dillon pleaded with agency officials for financial assistance. In correspondence reviewed by Maryland Matters, he said losses on one contract, commuter route 515, which carries approximately 200 commuters a day between Frederick and Montgomery counties, were going to sink his company. Closing shop would have thrown all 75 of his workers out on the street during the holidays, including those who worked on his profitable routes.

In a barrage of emails, Dillon floated two options to the agency. If they were willing to help defray his fuel costs, he could continue to provide service on a break-even basis. If they weren’t interested in that, he wanted to be let out of his contract prior to its scheduled 2024 expiration.

“On multiple occasions, I told him them, ‘Please just cancel the contract and put it back out to public bid,’” he said. “That’s the most orderly way of doing this, because at some point, I’m not going to be able to continue. I just won’t have money to pay my people.”

The MTA took several months to offer a substantive response. When it did, its message boiled down to this: We have a contract. Honor it.

On Oct. 26, then-Transportation Secretary Jim Ports responded to a May 19 email that Dillon sent to a top aide to Gov. Larry Hogan (R). In his letter, Ports noted that Atlantic Coast Charters had received $1,035,000 in assistance, mostly through federal pandemic relief funds. The figure included $35,000 in damages the state was entitled to — but didn’t seek — for missed trips.

“While we cannot control market changes, we have made significant adjustments, and we continue to work closely with our contractors,” Ports wrote. The secretary noted that the company had “firm fixed price contracts” with the state. “The MDOT MTA expects ACC to perform under the terms agreed by the parties.”

The assistance the company received — much of it from federal pandemic funding — pre-dated the 2022 spike in fuel costs.

In mid-December, Atlantic Coast sent the state a notice of contract termination, saying it would end service on Route 515 at the end of that month. Faced with the need to continue service, MTA launched an emergency procurement. Ironically, they entered into a $1.7 million contract with Hanover-based Dillon’s Bus Service, the firm Ron Dillon’s father, Ron Sr., and his uncles sold off in 2000. The Board of Public Works is scheduled to vote on the emergency contract on Wednesday.

Del. Nic Kipke (R-Anne Arundel), a Dillon friend, told Maryland Matters that he spoke with a top Hogan aide on the company’s behalf, last year. He was not seeking special treatment, he insisted, but he wanted “to make sure that (the state) has really thoroughly vetted this in a way that takes into account that it’s a small business and you’re not just brushing over the paperwork.” Kipke was told “the decision’s been made.”

On top of its decision not to help Dillon weather the spike in fuel prices, the state withheld $223,000 in payments the firm was due for its service in November and December — and they have sought advice from the attorney general’s office on a possible breach of contract action. Dillon said he could lose his house if the state presses its case against him.

The agency’s decision potentially pursue legal action against Atlantic Coast “doesn’t make sense to me,” Kipke said. The lawmaker said he plans to ask the Moore administration “to take a fresh look at this.” [On Tuesday, Gov. Wes Moore appointed former Metro General Manager Paul Wiedefeld to serve as secretary of transportation.

Atlantic Coast Charters isn’t the only long-standing company to face legal action from the state relating to rising fuel costs.

James River Solutions, a Richmond, Va.-based state contractor, informed the MTA in October that it would raise delivery rates on its diesel fuel contract nearly 26%, a move the agency said represented a “direct violation of (its) Statewide master contract.” Two weeks later, the firm informed the agency it had decided to walk away from its contract.

With its fuel reserve “quickly depleting” and the agency faced with a possible reduction in MARC train service in late November, the MTA was forced to scramble. The agency entered a $16.5 million emergency procurement with Sparks, Md.-based Carroll Independent Fuel.

The Department of General Services “is currently reviewing the James River Solutions contract in consultation with our Assistant Attorneys General to determine if the company is in violation of any clauses of the contract as well as future action for James River Solutions’ non-performance,” spokesman Nick Cavey said in an email.

James River Solutions did not respond to multiple requests for comment.

Dillon said Carroll is the same company he uses for fuel, and he sees strong parallels between his situation and James Rivers’. “MARC train basically falls under the same management as MTA commuter bus, and they are just unwilling to budge on any contract provisions,” he said.

He said the state’s new contract for commuter bus service is for far more money — “they’re paying three times what I was being paid” — even though the state is getting less service. Dillon’s Bus Service agreed to provide 22 routes a day; Atlantic Coast provided 28.

Although the state is within its rights to insist that vendors uphold their contractual obligations — and some taxpayers might cheer such a move — former state Treasurer Nancy Kopp (D) expressed surprise that the agency would play hardball with companies that appear to have been done in by circumstances outside of their control.

“I would think you could find some way to make a deal that keeps the state from paying more money for delivering the services that you want delivered,” she said.

Dillon also expressed optimism that the Moore administration will give his case — and others like it — a fresh look. “My family has been doing work with the MTA since 1985,” he said, “and frankly (the Hogan administration) has been the most difficult administration we’ve ever had to deal with.”