On the face of it, it sounds like a great deal: instead of “buses” you will have “stores on wheels,” instead of “passengers” you will have “customers,” and it won’t cost Nassau County taxpayers a cent more in tax. In fact, County Executive Ed Mangano is expecting to come away from privatizing Long Island Bus with paying the minimum subsidy (either $2.2 or $4.1 million, he wasn’t sure) in order to continue to qualify for federal funding. (The County is presently paying $9 million, and balked when MTA, the current operator of LI Bus, said it needed multi-millions more.)
Without a single public hearing or any community input whatsoever, the County Executive’s secret selection committee (the names were not divulged until the press conference on June 10, who turned out to all be County appointed employees) chose Veolia Transport, one of only three companies bidding, as the new operator for Long Island Bus.
In this atmosphere, the term “privatization” has everyone skeptical and, frankly, scared, especially given the Mangano’s track record. What will “privatization” mean for public bus service?
People have recoiled from the notion of privatization, but I think they are asking the wrong questions.
Think about it: is MTA such a great bus service provider? Is the status quo of MTA operating Long Island Bus service what those who want to preserve public transportation should be protecting?
But when you analyze it, Nassau County is simply replacing one operator (MTA, which is a quasi-public-private entity) for another (Veolia). The county would continue to own the buses, the garages, the bus shelters and transit centers, and be the decision-maker when it comes to “policy” (presumably fares and service) and about making capital investments in more efficient equipment Just how likely is it that this County government would actually invest in improvements to public transportation? (I wouldn’t be expecting those wonderful electronic signs that tell you how long the next bus will be coming along, any time soon.)
Here’s the irony: County Executive Ed Mangano thinks he is getting a public bus service for nearly no expense to taxpayers ($2 or even $4 million would be next to nothing).
But after an extensive conversation with top executives at Veolia Transportation, we learned that the company has not actually put dollar figures on anything. All they have done was made a proposal.
“This was not a bid,” said Mike Setzer, a corporate VP who presently manages Veolia’s Cincinnati system and is relocating to Nassau County as General Manager. “We were never asked to provide a hard number. We were just asked to provide our skills, our forecasts based on assumptions. That’s a long way to be a hard dollar bid.”
So it isn’t so much a concern about Veolia doing a “bait and switch” (the term that Legislator Wayne Wink used to suggest that the company promised a low-ball figure through 2012, but in future years, would raise fares, cut service or demand higher County subsidies). It’s more about County Executive Ed Mangano doing a bait-and-switch on residents and riders.
But talking with the Veolia management, anyone who is interested in seeing sustainable development and more mass transit in Nassau County, could see the possibilities – possibilities that could only be enacted by an Administration that actually sees the benefit of improving a sustainable mass transit system.
People are really concerned, for now, and that is because of the Mangano Administration’s penchant for secrecy, for keeping the public out of any participation in the policy decisions which impact their lives, and for governing by manufacturing “crisis” so that they can get their way.
In this case, the “crisis” is the drop-deadline of January 1, when Mangano throws the MTA out. That leaves just about six months to negotiate a contract, have it go through the Legislature’s Rules Committee and the Legislature’s approval process (which is likely the only actual public hearing on the fait-accompli deal, and we know from the redistricting charade what that public hearing will be like), then go to NIFA for its blessing (again, the choice will be “bus service or no bus service”), and then to the County Executive for signature. And somehow within this time period, there has to be the actual physical transition of Veolia taking over. All in six months.
And if a contract that does not all happen by January 1? Well then, 100,000 riders a day will be left stranded at the bus stop.
That means that Mangano can force the Legislature to act even if the deal seems lousy for Long Island bus riders and taxpayers (though Peter Schmitt and the Republican majority are more than happy to comply, leaving the 8 Democrats impotent once again).
But more significantly, the short timeframe works to the advantage of the bus company which can simply sit back and say “no” to any demands from the County.
When we asked Mangano at the June 10 press conference whether the contract had any performance guarantees – safety and on-time performance – that would enable the County to rescind the contract, he said that remains to be worked out in contract negotiations. Oh, by the way, it is only after there is a contract that a “public review process” will begin, he said.
“A commitment to fares and routes will be in the contract,” Mangano told reporters “We’re in the contract stage.” In the RFP, “this company was the best proposer for the county, and now the process continues with codifying their proposal into an enforceable legal agreement.”
Legislator Wayne Wink, Jr. (D-LD11), who met with reporters separately after Mangano’s press conference, raised these issues.
“As so often happens with this administration, the devil is in the details, and the devil has yet to emerge. This administration has always led with a press release without actual details about how it will proceed. This is the latest example. But there are too many people – 100,000 riders a day – whose livelihood, healthcare, education is at stake.”
Wink’s concern is that this is “bait and switch” – that the terms that Veolia is proposing in the Request for Proposal are so impossible, that once it wins the contract, after a year or two, “we will see our subsidy rapidly increase under threat of fare increases, service cuts or both… Suffolk County is example – private operators handle the system, their subsidy is vastly more than Nassau County’s” even though their public bus system is only 20-25% of the size of Nassau’s. Westchester also pays a substantially higher subsidy even though its system is smaller. (While the RFP is public, Veolia’s proposal is not.)
Existing levels of Long Island Bus service are supported by a $9.1 million subsidy from the County (which he wants to slash to $4.1 or $2.2 million), $25 million in subsidies from the MTA, and approximately $50 million in subsidies from New York State, according to Tri-State Transportation Campaign, one of the advocacy groups.
“Compared to the similarly sized Westchester County system, which receives approximately $30 million a year in local subsidies, the groups believe County Executive Mangano’s vision can only lead to severe service cuts or dramatic fare hikes for the over 100,000 riders a day,” Ryan Lynch, senior planner, stated.
In other cities where Veolia operates, the company receives much higher levels of subsidy, as well. The company gets $80 million from Las Vegas and $73 million from Phoenix, which are not much bigger than L I Bus would be, Lynch noted.
What magic wand would Veolia have that would enable the operator to run the same service, at the same fares, with less subsidy than the MTA and still (because it is a private company) make a profit? It all seems too good to be true.
So we posed these questions to Veolia. Here’s what we learned:
The RFP only promises to keep service levels and fares at current levels for 2012; aren’t you allowed to raise fares by 20% the next year? Is this a bait and switch?
“Policy levels are not our job,” stated Dick Alexander, Senior Vice President of Business Development, during a conference call from Veolia’s Chicago headquarters. That’s the job of decision makers of Nassau County… Nassau County is making those decisions.”
Setzer added, “We know that because of our skills, our experience, our size, we can do it more efficiently. Whatever dollars are available, we can deliver more.”
What about the present Long Island Bus workers. Aren’t they presently MTA employees and would they lose their jobs?
“We have said to the County that it is our intention to fill every position we can from the existing workforce,” Setzer said. “Especially among drivers, it is our hope and expectation for the great majority to become Veolia employees. Traditionally, we recognize the seniority of the previous employer, and we recognize the Union.”
Is the idea to hire workers at lower levels and is that how you will make the math work? What would you expect to happen to your labor costs compared to MTA?
“It is difficult to answer today because we intend to negotiate with the TWU (Transit Workers Union), but we aren’t going to balance the budget by having cheaper labor….We understand that concern.. As soon as we have a little bit of groundwork laid with Nassau County, we will provide as much information as fast as we can to both employees and customers.. We haven’t negotiated a deal yet, so the details aren’t there, and we haven’t met with the TWU…
“This is one of the areas, without a final agreement, it is impossible to give a detailed answer,” Setzer said. “There are a bunch of variables: cost per unit-hour of service. We have different cost levels [from the MTA]. We have 150 operations in the US. We think we can do some things less expensively – scheduling and service design. We think we can squeeze some efficiencies.. some services where can substitute something less expensive.”
On the other hand, he added, “People don’t necessarily know MTA’s overhead expenses, so we don’t know how they make that allocation.”
What kind of efficiencies do you bring?
Veolia points to its sophisticated management systems – which is essentially what the County is hiring – to cut operating expenses and improve efficiencies.
For example, “We use a system, SmartDrive, on vehicles – a piece of technology that we install that includes cameras, engine monitoring that allows us to help drivers drive in a more ecologically friendly way,” Setzer said.
“Our experience is that we can lower fuel cost 4-5% just by this technology. It shows when the driver is using more fuel than is needed, pressing too hard on the gas. It shows the driver when he is driving green. It is a behavior modification tool that helps drivers drive more efficiently and also safer, because cameras help. As a result, we are able to lower fuel cost, increase safety performance, which in turn will decrease insurance cost. So we apply techniques like that that is a win-win-scenario – lower-cost, improve performance, improve driver performance. And it gives customers a better ride.”
At the June 10 press conference, Mike Aesch, outgoing CEO of Rochester Regional Transportation authority who was hired by Mangano to vet the Veolia selection (he gave his blessing and now has been hired by Mangano to oversee the transition from the MTA),described the approach that the private operator would use as “a store on wheels” rather than a bus and “customers” instead of passengers.
“‘Store on wheels’,” reflected Setzer. “I like that kind of thinking – more business, more retail customer oriented, which is the way I like to think about it. “
But the concept of a “store on wheels,” combined with Veolia’s concept for new technology, got me thinking, as well:
Would increasing advertising revenue be a means of keeping fares down, service up with less County subsidy?
“The level of advertising revenue that MTA is getting currently is modest,” Alexander said. “We think we can do better on advertising, significantly better…. Now transit advertising is 1-2% of total budget.. if you double it, is that significant? It is real money.”
In fact, the company is looking at ways to tap into social media as a potential revenue generator – think Groupon, Living Social, and the possibility of coupons being distributed from local retailers on the bus. “We are looking at the potential of advertising both onboard and through websites, and creating partnerships out in the community where we have the potential to raise additional revenues.”
What about the accusations leveled by Long Island Jobs With Justice, that the city of Phoenix leveled a $3.3 million fine for 50,000 instances of being late in a three-month period?
“That is erroneous,” Ruth Otte, Executive Vice President of Marketing & Communications, said from her Washington DC office. “The data in some new software was inaccurate, and added up inaccurate measurements. The city is working to correct the error….We were never officially fined.”
To the contrary, she said, the company has a 96% on-time performance rate in Phoenix, which is considered excellent for an urban area. “Most cities have a standard of 90-94%, so 96% is excellent.”
Did you lose the City of Las Vegas, where you have had the contract for 19 years?
“That is still being decided. Las Vegas is strapped for money, and may go with a lower bid. We won on quality and technical approach, but our competitor had a lower price. Las Vegas … is one of the top 10 systems in the country, as evaluated by Brookings Institution. We are proud of that.”
People still are concerned about the term ‘privatization.’ What will that mean for Nassau County?
“This isn’t privatization,” Setzer said. “The assets remain the County’s. This is a public-private operating partnership, we are stewards and caretakers of the operations of the equipment that belongs to the County. This is not like a charter company coming in. We are the managers of public systems – that’s where there are misconceptions. This is not like the local charter company. We are a professional manager of public transit systems. The relationship with the County is that we will present to them all that we do. They still remain the policy-makers for service, fares….. We provide the well-honed systems. We bring our efficiency, they retain the policy and decision-making and accountability.”
Veolia Transportation operates some 150 transit systems in the US including San Diego, Denver, Greater Phoenix area, Tucson and Seattle. The parent company, Veolia Transport, based in France (which just merged and is changing its name to Veolia Transdev), is a $48 billion company that works with 5000 transit authorities around the world, handles 2.7 billion passengers, has 119,000 employees in 28 countries. Long Island Bus would be its largest bus system contract, but not its largest transportation system in the US (that is Boston’s commuter rail system).
Isn’t it ironic to force a contract that mandates keeping the present system intact? The question should not be whether Veolia should simply step into the MTA footprint and maintain the same schedules and routes, but why isn’t Nassau County asking an expert in sustainable transportation systems to do a complete overhaul?
“The Portlands of the world – none started from scratch; they all evolved,” Setzer said, reasonably. “In future years, we could evolve Long Island Bus into a world-class system. But it won’t happen overnight.”
Legislator Wink, speaking to reporters after Mangano’s press conference on June 10, did not close the door on Veolia, and about the MTA, he said, “there are no angels here.” But he added, “my real concern, if this administration is drawing up contract, guidelines and threshold, do we set the bar so low that anybody can meet it, or high enough that 100,000 riders a day can be relatively assured of getting to their work, school or doctors? My experience with this administration is that they aren’t concerned about the big picture, the real concerns of the commuters of Nassau County. That frightens me, quite frankly.”
He said that this Administration has been disingenuous all along in its dealings with MTA. “We have been negotiating from a position of weakness, not strength, because this administration drew an artificial line in the sand that it will provide $4 million, and that’s it.” That would draw few “takers” and in fact, only three companies bid to replace the MTA (Setzer said that there are only three companies with the capability of handling Long Island Bus).
Wink wanted to use the revenues from the red light cameras – traffic scofflaws – toward the subsidy the county provides Long Island Bus.
“As far as I’m concerned, it makes a lot of sense, that people who violate laws, who run red lights, should subsidize mass transit. That’s been my proposal since last September. Whether or not sufficient- this administration has never entertained that… they have been committed to privatizing this system from day one.”
Wink was soon joined by more than a dozen Long Island Bus advocates who had been blocked from coming to Mangano’s press conference and were left outside the County Building in 93-degree heat with their placards. They expressed their skepticism at Mangano’s motivation in privatizing Long Island Bus “from Day One”, noting that Veolia has been advertising online for Long Island bus operators for months.
(In response, Veolia said that it is common to advertise for senior management in conjunction with advancing a proposal, and in response to a “pay-to-play” charge that the company paid $40,000 in fees to Park Strategies, Sen. Alphonse D’Amato’s firm, Setzer said that all the companies hire a local consultancy who is familiar with the political landscape, and they were drawn to Park Strategies because Robert McBride was known to the firm. “All the competitors in this process hired someone similar to work with them locally. It’s not unusual in procurement processes like this.”)
It may be that Veolia is the best thing that could happen to Nassau County’s public transit system. But it would seem that the public should be heard and be able to come away from the process with greater assurances.
“We need more robust public input,” said Brian Lynch, of Tri-State Transportation Campaign.”We need a public hearing that is more than the Rules Committee or the Legislature. We need a robust public process. They shouldn’t make decisions that affect 32 million riders a year behind closed doors.”
Since reporting this article, a reader alerted us to reporting from Charleston, South Carolina, where Veolia Transportation is the contractor for the public transportation system, CMRTA, which suggests that privatizing and outsourcing public bus is not a panacea. That city is in the horns of a dilemma concerning service cuts and fare hikes:
Bus officials weigh big cutbacks
Deficit hits bus system; $3 million shortfall could slash routes in half, cut jobs
–Karen Rubin, Long Island Populist Examiner
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