We are being sold a bill of goods that somehow, private companies do everything better than public entities do.
Tell that to American Airlines.
The airline just declared bankruptcy. It would like passengers and future passengers to know that everything is just honky dory – don’t worry about maintenance or safety issues, everything is just fine. But this is the way American Airlines has for screwing its workers out of their pensions, retirees out of their health benefits, and investors out of their investment in the company, all to tidy its accounting.
But because American Airlines is a private company, it can also can sell off assets – though they are not likely to be selling their slots at John F. Kennedy Airport any time soon. They can cut routes that don’t generate the optimum load factors, so if the good citizens of Harrisburg, Pennsylvania, were depending upon American as its link to the rest of the world, but the numbers just don’t add up, then tough, that city is without service.
Now let’s look at the Long Island Bus.
Nassau County Executive Ed Mangano is convinced that privatizing Long Island Bus will be a win-win-win for Nassau County: privatization will save taxpayers tens of millions of dollars in subsidies, will improve service for riders, and if they play their cards right, most of the Long Island Bus workers who are now part of MTA will get to keep their jobs, though it is not clear if they will have to lose 27 percent of their pensions or have to settle for cuts in wages and seniority.
That part of the contract – the labor component – seems not to have been settled, yet the county is rushing to approve the contract with Veolia Transportation, before Jan. 1 when MTA presumably shuts off the lights and leaves people at the bus stop.
Just how many people?
Long Island Bus carries “nearly 100,000 people every day, 31 million riders a year; plus 280,000 rides a year for Able Ride. Long Island bus has a fleet of nearly 315 fixed route buses and nearly 100 buses for Able Ride
“Next to gas and electric and water, there is simply not a public service in the community utilized more than public transportation,” said Mark Aesch, the former CEO of Rochester’s transportation system who was hired as the county’s consultant to choose among the three proposals (awarding it to Veolia, without an actual bid).
Aesch insisted that the Veolia deal “will stabilize fares for the riding public, will improve quality of service the community will be able to enjoy, and will preserve jobs for members of organized labor, will reduce the reliance on local taxpayer dollars by millions, and for the first time, give Nassau County control.”
But that is more the hope, rather than what is likely to materialize.
Aesch noted with glee, “The contract includes something that is revolutionary: expenses must equal revenues, and the two parties must work together in a collaborative fashion to realize that.
“The budget of $106 million is made up of 40 percent of revenues from customers… Balancing the budget each year brings stability and increases quality of customer experience.” (He forgot to mention $53 million in federal and state aid in 2011, which is based on ridership, so would be reduced by about 4,000 riders with the service cuts.)
On a typical route, 40 percent of revenue comes from customers and 60 percent comes from other sources. Veolia will be allowed to analyze buses that require three times the subsidy.
“95 percent of customers see a taxpayer subsidy of $1,100 a year, on 2 percent of service there is $3,700 taxpayer subsidy a year, and some, $7,000 taxpayer subsidy per person per year. It doesn’t take a calculator to realize it is less expensive to buy some folks a car.”
But we all know that Nassau County is not going to buy these people a car; they will just be left with no way to get where they are going.
That is the very opposite of what government is supposed to do.
As state Sen. Charles Lavine told the county Legislature during this “kangaroo” public hearing (in the sense that everyone knows it is a foregone conclusion how the Republican majority will vote, and it was only the embarrassment of voting the same night, before the public comments could be “evaluated” that caused the Nassau County Legislature Presiding Officer Peter Schmitt to put off the vote until Dec. 16, something the Democratic minority didn’t learn until reading it in the newspaper.
“This contract is supposed to be a public-private partnership, not an abdication of public responsibility to protect citizen taxpayers and a valuable public asset.
In an op-ed in Newsday, Veolia Vice President Setzer said the company’s goal is to change the system, to put resources into the routes in the greatest demand. And [the county’s consultant Mark Aesch, in his remarks, made that case precisely and explicitly: putting less into the less profitable routes. That’s what corporations, private enterprise is supposed to do to maximize profit, that’s why we own shares.
“The problem is that many of the 100,000 riders each day are our lowest earners, working not one, but two or three jobs simply to scrape by,” Lavine said. “Because they earn the least, they often live in the most remote, least expensive areas, but areas which are the most expensive to provide public transportation. Our inability to provide public transportation is not only morally abhorrent but threatens a sector of economy that depends on that transportation – they do the work servicing hospitals, nursing homes, assisted living facilities. These all depend on low-wage earners.
“There’s an old saying that if you aren’t at the table, then you most assuredly will end up on the menu,” Lavine said. “You have the sense from those who have spoken and will speak, that Nassau County citizen taxpayers will be on the menu – they do not deserve to be taken advantage of.”
Tara Klein of Vision Long Island, which advocates for sustainable development and transportation alternatives, told the Legislature, “We all want a common goal, run bus system safely, affordable, in a way that protects riders, drivers, taxpayers. But within the contract, we have outstanding questions and concerns and little faith in Veolia to meet our common goals because of the potential for service cuts and fare increases….
“And where is the innovation in this contract? That is important to know, with our goals for downtown revitalization and transit-oriented development. Everyone is coming together around these goals…This private company should lay out a vision for expanding service in the future, adding innovation. The contract doesn’t do that. It makes riders nervous about continuing even their current level of service.”
Joan Walton, a South Hempstead resident, also questioned the fuzzy math and the lack of progressive vision.
“If you are adding profit, that is adding expense to the mix. You are making profit on the back of the working poor. Working people don’t deserve that. We are one of the most segregated counties in America,” she said. “That didn’t come by accident, but by decisions like this – privatizing bus service. We ought to run an ad in the skinhead journals saying, ‘Come to Nassau County, racists, it’s a wonderful place to live. You can live in our lily white communities and not worry about persons of color. Our legislature is determined to keep them out.’ …When other areas are integrated, moving into the 21st century, we are living in the past. We should call Nassau County Jurassic County.”
Charlene Obernauer, executive director of Long Island Jobs with Justice, contradicted the image presented of Veolia as the company that already handles four out of the five largest privatized public transportation systems in the country (note the qualification “privatized”).
Aesch cited Las Vegas and Phoenix as cities where Veolia presently operates the bus lines, but she noted, it failed to mention Columbia, South Carolina, where under Veolia, “fares have risen over 100 percent and Veolia is proposing 63 percent cut in service, proposing eliminating weekend, holiday service.”
She noted that at the get-go, Veolia proposes to cut 12.5 percent of routes in the first six months, and in the second six-month period, can cut 23 percent more – that would be more than one-third cut (better than the 56 percent reduction that MTA threatened, but exactly the difference between $87 cost and $128 (ah, there’s the magic!)
“We don’t have to compare Veolia to MTA. We can look at the quality of service being put out there.”
Rather than be subject to oversight, the contract allows for Veolia to cut routes at their discretion if a route is less than 20 percent profitable; if a trip within a route is less than 20 percent occupied on average. Also, up to six routes may be cut within the first six months of Veolia starting operation.
Also, if “farebox” revenues are below 10 percent of the projected amount for more than two quarters, Veolia can renegotiate the agreement (that means, raise fares or cut service).
“This contract needs to be revised,” she said, though Schmitt was barely listening. “We will see service cuts, fares increased, and union jobs cut, just in the report this morning, 138 MTA employees will be laid off after the 67 routes are cut. That’s already in the contract…
“This is a 10-year contract – five years, with the option to extend for five more – so you need to be careful about looking at the details.”
Details, Details
Under the terms of the contract as outlined by Nassau County Comptroller George Maragos, the county will give Veolia a fixed fee and a variable fee. In the first year, the fixed fee for the first year will be $27.6 million (what happened to the $2.5 million?), with subsequent increases to be approved by the Transit Advisory Committee; the variable fee in the first year will be $87.12 per vehicle hour for fixed route buses and $55.81 per vehicle hour for Paratransit service, rates which will be adjusted each year.
Now, Maragos told me that the Veolia operating cost is less than MTA’s, at $87 per hour versus $128 per hour – but he doesn’t say how that is broken out – how much of the difference in hourly cost is based on fewer workers, lower wages, or less contribution to benefits? In other words, how much of the for-profit component is extracted purely from labor?
As Maragos admitted, if there is a shortfall in revenue – from fares, advertising, grants – the difference would have to be made up through fare increases, increased county funding, or service cuts.
Indeed, the difference in operating cost seems to come from the projection of 168 fewer employees, based on reducing service on six routes, affecting 1,200 riders.
Well, then. Where’s the magic?
And what about service to riders? What does that really mean?
Mangano who most dramatically addressed the Legislature at the beginning of the public hearing (getting boos and catcalls from the audience), said that the Veolia deal means that for the first time, Nassau County will be calling the shots.
Instead of having just one member from Nassau County out of 22 board members at the MTA, oversight of Long Island Bus will be a five-member transit advisory committee, all Nassau County residents. It is questionable who the committee would be responsible to, or how much power it would actually have or whether it is more for show (like the Federal Elections Commission): the county executive would appoint three of the five members, one would be appointed by the legislative majority and one by the legislative minority. And while they are supposed to give the say-so to fare increases and route changes, the way the contract is written, Veolia would have innumerable ways to reduce service, raise fares and extract more money (there’s a provision for “Major Event”).
And then there are the known unknowns and unknown knowns: Even Maragos said that there is the potential for a $23 million liability (possibly as much as $84 million) on the county’s part if Veolia cannot reach a settlement with the transit unions (again, savings are on the backs of labor, who would lose 27 percent of their pension, rather than any true efficiencies; what is more, there is confusion as to whether the liability would be Veolia’s or the county’s, but that would be immaterial because there are provisions that enable Veolia to turn its profit one way or another, so if they have to swallow $23 million, you know who will wind up forking it over.)
The question that should have been raised (but wasn’t) is what magical formula does Veolia have that enables it to deliver the service at a fraction, a mere fraction of what the county was paying to MTA as a subsidy and still turn a profit, since it is a private company. Just how much less? MTA was getting $9 million from Nassau County and was demanding $36 million or would cut 56 percent of service.
Well, Veolia is supposedly only taking $2.5 million as a subsidy from Nassau County. How is that possible?
It’s not so much that people are so happy with MTA, but are concerned that what is being tossed aside is the very essence of “public” transportation, versus “for-profit” transportation provider.
Shouldn’t someone question how Veolia could deliver what it says will be the same level of service at the same fares, turn a profit, and do it for a fraction of the subsidy?
Something doesn’t make sense.
Well it turns out that under the terms of the contract, Veolia, a multi-national company which at $30 billion a year revenue is the behemoth that makes Nassau County seem puny (if not naive), has tremendous latitude to cut service, raise fares in order to eke out its profit.
In fact, as currently written, Veolia can change (raise) fares on a quarterly basis, not even on an annual basis; there are also provisions to raise fares, if the “farebox” revenues are 10 percent less than projections. Service levels can be adjusted at Veolia’s discretion if a trip within a route is less than 20 percent profitable; if a trip within a route is less than 20 percent occupied on average; and up to six routes may be cut within the first six months of Veolia starting operation.
But here’s the crux: Routes and fares are numbers, but the riders are actual people – students who depend on public bus to get to school; low-wage earners who live in outlying areas and cannot afford a car, many of whom staff the hospitals and nursing homes; elderly and infirm who are not able to drive and need to get to medical appointments and who depend on the public bus for a dignified, independent life.
The zeal here is to somehow put market forces to play, but there is no real competition: there will be one public bus system. Still, the public transportation system will be operated according to a profit-making model. That means that routes that are not profitable, do not generate enough ridership, will be cut.
It goes back to the difference in objectives and mission between “public,” what is known as “the commons” and “community” versus private, for-profit entities.
Privatizing Long Island Bus is only the warm-up match. Mangano has already signaled that he intends to look next to privatize the waste treatment system, and then probably other public services, including sanitation and water.
Here in Great Neck, there are still people who remember Citizens Water Supply, the private company that was the precursor for the governmental Water Authority of Great Neck North.
