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ATU is committed to keeping public services in public hands. However, transit authorities, school districts, cities, and other public bodies, many of whom are still reeling from the financial crisis of 2008, are lured by the promises of lower costs through privatization of public services. Unfortunately, this decision is often informed more by ideology than a realistic appraisal of cost-savings and quality.

Does privatization really save money? Eliot Sclar, Professor of Urban Planning at Columbia University, argues that the belief that non-union, private operators can provide transit services more efficiently than public employees overlooks two important problems. First, once the initial contract is awarded, the service becomes a de facto monopoly in which the incumbent has the upper hand in each subsequent round of bidding, essentially eliminating competition. Second, transit productivity relies on external factors, such as traffic patterns and ridership levels, that exist regardless of whether the bus drivers are public or private employees.

When municipalities open up their transit systems to private bids, companies try to underbid each other in order to win the contract. After the contract is won, often the workers are forced to make up the difference by giving away wages and benefits. Employees of private contractors earn lower wages and enjoy fewer benefits than their public sector counterparts. When employees are underpaid and overworked, it becomes more difficult to attract qualified workers. A 1999 report on school bus privatization noted that “private contractors have been beset by safety problems, many of which emanate from a lack of experience and from employing people at the low end of the wage scale.” ATU is committed to raising labor standards in the private transit industry through collectively bargaining.

In Phoenix, AZ, privatization turned out to be a losing game for the city after the private contractor, Veolia, used a variety of tactics—including putting the mayor’s girlfriend on their payroll—to get additional money out of the city after the contract was signed. Veolia originally underbid the closest competitor by nearly $13 million, but lobbied the city for more money when the ATU refused to accept the harsh cuts such a contract would impose on workers.   Source: Phoenix New Times

The ideology that goes hand-in-hand with the privatization push often demonizes the public sector as inefficient or corrupt, and touts the private sector as the answer to these problems. However, private companies can also be corrupt—just think back to the Enron scandal—and contracts mean they can keep receiving public money without ever improving efficiency, at least until their contract is up.

Private operation of transit services has become increasingly dominated by three firms: First Transit, Veolia Transportation, and MV Transportation. 

First Transit is a subsidiary of FirstGroup, a multibillion dollar corporation headquartered in the United Kingdom. FirstGroup also owns First Student and Greyhound. Veolia Transportation is a subsidiary of Veolia Environnement, a multibillion dollar conglomerate headquartered in France. It also consists of water, waste, and energy divisions that operate around the world.  MV Transportation is the only American-owned company in the top three. It employs more than 13,000 people and is headquartered in California.

School Bus Privatization:

Of the 500,000 yellow school buses on the road, about 30% are operated by private contractors. The private school bus industry is highly fragmented, but is dominated by First Student, part of First Transit, with a fleet of over 60,000 buses. First Student’s closest competitor has a fleet about 1/3 that size.

ATU Priorities:

  1. Preventing the privatization of public services and returning subcontracted work to public entities whenever possible.
  2. Improving the wages, benefits, and working conditions of private transit employees.
  3. Aggressively pursuing grievances and unfair labor practices to preserve the integrity of our collective bargaining agreements with private employers.

Online Resources:

    •  “When Ideology Drives Decisions,” Eliot Sclar op-ed for the New York Times
    •  Broome County Transit: Keep It Public Report (PDF)
    •  KPMG's Report on MARTA: Faulty Data, Wrong Conclusions (PDF)