Roles of a private nonprofit corporation and the city Transportation Services Department, the City Council and the mayor all have come into play over the past few weeks to blur distinctions over who is responsible for O'ahu's bus system.

As defined by city ordinance, the responsibilities of the city and its private bus service contractor are convoluted, requiring coordination between the two to operate TheBus.

The private nonprofit contractor, Oahu Transit Services Inc., is paid a management fee for day-to-day operations such as customer service and bus maintenance. It also negotiates with the union.

Revenue from TheBus is income of the city, but it is used by Oahu Transit along with taxpayer money to pay for operations, including wages of bus drivers. The drivers are employed by the company, not by the city.

Oahu Transit makes budget and service schedule recommendations, but the transportation department makes those decisions, relying in part on a joint committee of company and city representatives as well as spending limits established by the City Council.

Though the city does not have the power to approve or disapprove a collective bargaining agreement for Oahu Transit employees, labor contracts affect the budget, so the city does influence negotiations.

The influence was evident when Mayor Jeremy Harris proclaimed there is no money in the city budget for bus driver pay raises, and when the council agreed to avoid service and possible job cuts by increasing fares.

The city has authority to approve and remove the company's private-sector directors, who in turn pick company executives.

According to the city charter, Oahu Transit is "deemed an instrumentality of the city" for purposes other than labor and employment.

Roger Morton, Oahu Transit vice president, calls it a "very ambiguous status" and says: "The intent is to try to keep the private-sector mentality within a government enterprise."

TheBus has operated under such a structure since 1971, when then-Mayor Frank Fasi, in the aftermath of a nearly two-month bus strike, helped set up the nonprofit Mass Transit Lines Inc. to assume for-profit bus operations from Harry Weinberg's Honolulu Rapid Transit. Bus employees under MTL continued to be represented by the Teamsters union, preserving their private-sector employment.

MTL's no-bid arrangement existed for nearly 20 years until charges arose that company employees were ordered to repair and service private vehicles. That led to voters' approving the creation of a city Public Transit Authority, which solicited bids from private nonprofits to operate TheBus.

Oahu Transit was created by a former Hawaiian Airlines chief executive, Paul Finazzo, with Michael Devich, then an executive with Outrigger Hotels, and Gwendolyn Au, who was general manager of Kuhio Mall in Waikiki.

James Cowen retired as chief executive of the bus and light-rail system in Portland, Ore., to lead Oahu Transit as president. Morton, a one-time city and MTL employee, also joined the team.

Morton said the nonprofit was the genesis of civic-minded business leaders from the community. "There was no remuneration for them," he said. "They were people interested in good public transit."

The authority picked Oahu Transit over four competitors. Selection based on team qualifications and a $375,000 bid that was $60,000 under the next low bid. Oahu Transit hired MTL employees, continuing the Teamsters relationship.

Since the 1991 bid, there has not been competition for the operating contract because of the operator's treatment as a city entity.

Oahu Transit continues to be paid a $375,000 annual management fee. The sum covers the salaries and benefits of Cowen and Morton, as well as employee morale events such as bus-driving competitions on the Mainland.

The rest of the $117 million annual budget covers expenses such as payroll, fuel, insurance and maintenance.

Bus operations under Oahu Transit have been named "America's Best Transit System" by the American Public Transit Association in 1994-95 and 2000-01.

The company and its unionized employees have had contentious labor negotiations, either rejecting initial settlements or threatening to strike in each of three contract renewal periods in the past 12 years.

Morton said Honolulu's public transit model is fairly unique though somewhat similar operations exist in Milwaukee, San Diego and Phoenix. Other cities rely on private contractors while the predominant model is public transit authorities.

The different models all have examples of well run and poorly managed systems, according to Morton.

"I don't know if there is a perfect model," Morton said.