The Highway 17 Express bus service from Santa Cruz & Scotts Valley to San Jose is operated by the Santa Cruz Metro Transit District (Metro). Metro's policy when the bike racks are full is to allow bikes on board in the handicap seating area if there are no handicapped passengers. Bikes are not permitted in the luggage compartment underneath because the compartments can't "accomodate both bikes and luggage" according to Metro, although the luggage compartments are used very rarely.
The Highway 17 bus service has been filled to near capacity on many trips over the last few weeks as more commuters and day trippers use the relatively inexpensive service to travel over the hill. With this increased use comes more bikes on board. Santa Cruz Metro received one customer complaint about those displaced from the handicap seating to make room for bikes on board.
In response to this complaint, the Metro Advisory Committee voted unanimously to change Metro policy and prohibit bikes on board after September 2008. The Santa Cruz Metro Board must still approve this policy.
I've alerted People Power Santa Cruz and have phone calls to the Santa Cruz Metro board and staff about this. As soon as I get a response and find out what to do about this I'll post an update.