Ten Reasons Why Transit Privatization is Bad for the District:

By staff - ATU Local 689, May 30, 2017

1. Privatization does not guarantee savings.  Proponents of privatizing transit often make lofty claims about savings through private sector efficiencies. But frequently these claims couldn’t be farther from the truth. Public agencies are often more efficient because no profit margin gets siphoned off to shareholders.

• In Phoenix, Veolia demanded an additional $27.5 million on top of its existing $386 million contract. Veolia threatened to leave on short notice during contract negotiations if the city did not meet its demands. 1

• Officials canceled a management contract with First Transit in Green Bay, Wisconsin. The public agency experienced a cost savings by managing the system in-house.

• Veolia was dropped after 3 years by Chatham Area Transit (CAT) in Savannah, GA after the CAT chairman concluded that the private operator “was becoming too expensive.”

2. Service issues may rise: any savings often come from cutbacks.

Contractor claims about service should be taken with a grain of salt. Up-front savings are often coupled with cutbacks, hurting the most vulnerable users like the disabled and children.

• In San Diego, First Transit promised $10 million in annual savings by taking over the North County Transit District. Modest cost declines were primarily due to service cutbacks. First Transit operated 14,000 fewer service hours while other costs shot up by $1.4 million primarily due to administrative fees. 

• Between 2008 and 2010, MV Transportation was fined 295 times for bad service in the city of Fairfield, CA, which had turned to the private operator as a solution to budget shortfalls. Officials concluded that the private operator “exhibited mostly negative trends in all areas” related to performance and efficiency.

• In Nassau County, NY Veolia slashed service to close a $7.3 million budget gap. More than 30 routes saw cutbacks, in all 60% of the system experienced service declines. 

• After 19 years of privatized service in the Toledo, OH area, paratransit riders complaints

were so numerous that the agency fired First Transit. 

3. Privatization can undermine safety.

Private bus operators are known to have less experienced drivers (due to higher turnover) and more mechanical difficulties (due to inadequate maintenance). These can present enormous safety hazards to riders.

• In Denver, private operators running buses side-by-side with publicly operated buses had a worse safety record.

• In Austin, TX, bus mechanics became concerned that Veolia was cutting corners on maintenance. They risked their jobs and went public about safety hazards. Among the issues were defective emergency brakes, tired brake pads, and faulty hoses. 

• In Houston, news media reports indicated that First Transit operators were responsible for a number of high profile accidents, injuring car passengers and pedestrians.

4. It could leave us open to more political corruption.  Political corruption in the District is giving us a bad reputation. The District government has a responsibility now more than ever to ensure that key government functions won’t be used for personal gain. Contracting out transit services could lead to corruption making the politically connected wealthy on the backs of taxpayers.

• In 2011, the Federal Transit Administration asked the Office of the Inspector General to investigate a contract awarded to Veolia in Phoenix. Former mayoral staffers were  found to have had undue influence on the awarding of contracts. The mayor’s campaign fundraiser and his girlfriend were reported to be Veolia employees.

• When city officials in Fairfield, CA grew disgruntled with the poor quality of service provided by the contractor and fined the company 295 times, MV Transportation responded by making $10,000 in campaign donations to city council members. Fines were suspended and some were canceled.

• A District appointee to the WMATA Board of Directors, Tom Downs, also serves as the Chairman of the Board of Advisors for Veolia.  This is a current conflict of interest.

5. Many private operators have poor track records. Privatization will require efforts to keep a watchful eye on public money.  Keeping companies accountable requires more oversight and resources than with a public agency. We will need numerous (and costly) accountability mechanisms: auditing, legal fees, transaction costs, and staff time. A publicly owned and operated service, like WMATA, already has such processes in place to ensure accountability.

• In Denver, private contractors were replaced 3 times in 3 years requiring enormous transactions costs as the agency had to find a new operator for transit services. 

• During a 3 month period in 2011, Veolia was fined $3 million for poor performance, primarily due to buses running late. Unfortunately, most of these fines were waived and Phoenix riders were left with substandard service.

• In Roanoke, VA, a 2009 audit of the Greater Roanoke Transit Authority showed that First Transit misused $70,000 in taxpayer money. The General Manager billed the city for more than $14,000 spent on golf, cigars, alcohol, and fine dining.

6. We deserve transparency.  If a private operator runs our system, the public won’t know how our public resources get spent.

A private takeover of public transit can mean important information about what the system costs taxpayers gets “lost.” Companies frequently refuse to tell the public about operational problems leading to cost overruns and spending scandals.

• When asked by the mayor of Columbia, SC to account for operational costs, Veolia refused to open its books. The company made the galling claim that as a private, for-profit company it was exempt from disclosure. It still has not released enough details.

7. Fares on privatized systems go up over time.  Contractors often mislead public officials about the true costs of their services because they tend to focus on early years of service rather than later years when older equipment requires additional maintenance.

• In Nassau County, NY, a public transit advocacy group cried foul over a clause in Veolia’s contract to operate the Long Island Bus which allowed the company to raise fares by 25% without county approval. 18

8. Contracting with private transit companies can lead to procurement abuse.

• In Roanoke, VA, the assistant general manager, a First Transit employee, was accused of bid-rigging that resulted in $200,000 of procurement costs for his wife’s decorating business. He was fired and the audits were sent to the U.S. Attorney General’s office.

• The Federal Transit Administration formally admonished Phoenix for extending an $81 million contract with Veolia without a bidding process. Veolia had intimate political ties to local officials.

9. Drivers responsible for our safe commutes will be forced to work at lower wages with fewer benefits.  Experienced drivers with good track records will leave the profession.  Drivers at private operators typically have much lower wages than public workers. Workers are driven out of their job as wages and benefits fail to keep pace with their experience as a safe, effective drivers. The result is not only high turnover (which carries additional training costs), but a low-road economic approach to workers charged with keeping us safe each and every day.

• In the greater Sacremento, CA area, the Yolobus system lost over half of its First Transit drivers in a year. While the regional transit system paid its top drivers $21 an hour, First Transit paid its most experienced drivers $14 an hour. As a result of the low-wages and

fast turnover, the head of the agency publicly discussed firing First Transit and bringing operations in-house or merging with the regional transit system.

• According to a spokesperson from the American Public Transit Association, “I don't want to sound like I'm against privatization, but there's no inherent advantage of it… There's nothing about that private-sector manager that makes him a better manager than a public-sector manager… if the savings are all, say, in the labor part, then you say all you're doing is competing for the lowest wages.”

• When transit systems were privatized by Veolia in Nassau County, NY and New Orleans, LA, workers lost retirement benefits. A spokesman for Veolia in North Carolina stated that the company refuses to take on any pension plan responsibilities.  Strangely, Veolia is controlled by a French financial institution that administers pensions in France.

10. The creation of multiple systems within a system can be confusing for riders and policy makers.

Navigating beyond our borders is already a difficult task. As jurisdictions continue to operate transit services outside of WMATA, riders must endure confusing signage, transfers, and waits because transit services are not coordinated. Adding another layer of transit service in the core of region’s transit system can only add unnecessary complications. Worse, policy makers making budget decisions will only face ever more complicated decisions in choosing how to allocate scarce resources to multiple, sometimes redundant services.

• We’re already seeing signs of this in the District. WMATA’s Metrobus service and DDOT’s Circulator service have two different sets of maps, signs, phone numbers, and naming conventions.

Disclaimer: The views expressed here are not the official position of the IWW (or even the IWW’s EUC) and do not necessarily represent the views of anyone but the author’s.