Denise Provost

Alderman-at-Large

City of Somerville, Massachusetts

This article by Denise Provost was published in the April/May 1997 issue of the Somerville Community News:

'T' moves on bus route sell-off plan

Will Somerville see British bus chaos?

Other U.S. metropolitan areas have undertaken smaller scale transit privatization measures. Houston operates its park and ride service under private contract; Seattle does the same with its express bus service. Denver, Los Angeles, San Diego, New Orleans, Miami, and several midwestern cities have similarly introduced some degree of what is also called "competitive tendering" into their mass transit systems. Generally, however, transit systems privatize a portion of their operations roughly equal to the natural employee attrition rate. Besides protecting the jobs of present public transit employees, such piecemeal efforts presumably allow a transit authority to evaluate a contractor's performance before committing the fate of an entire transit system to a new operator. The typical privatized transit contract in the U.S. has generally involved about 50 vehicles; a few "large" contracts cover 100 to 200 vehicles.

The MBTA, however, has put all of its bus services - over 900 buses, plus service and support vehicles - on the auction block at once. Routes are not being offered as a single package, but have been clustered, for bidding purposes, into five "service bundles." Prospective operators may bid on one or more "bundles." Potentially, however, all bus service operations could be outsourced, whether to a single contractor or several. If this happens, what can we expect ?

Roots of British privatization

In 1979, Britain elected Margaret Thatcher as its Prime Minister, putting its Conservative Party, also known as the Tories, into power. The new Tory government began planning the privatization of many of the nation's public enterprises, including the enormous transportation system. The Tories promote the belief that competition breeds such social goods as operating efficiency, service improvements, and cost reductions. In accordance with this philosophy, Thatcher's government sold off to private bidders various publicly owned gas, atomic energy, electricity, and water companies, as well as British Telecom, the national telephone and telecommunications company.

Nonetheless, many of Britain's privatized enterprises were, and remain, monopolies. The only place in which competition entered into the privatization of most of the utility companies, for instance, was in the initial competitive bidding for the purchase of these enterprises when they were turned over from public to private ownership. The businesses themselves in most cases have simply gone from being public monopolies to private monopolies. This switch was perfectly in keeping with the observation, made about Britain's two major political parties in the period just after WW II, that both supported the idea of the large economic unit:"Labour preferred the State, the Conservatives ... preferred large-scale private industry. Both showed little interest in the small businessman, offering little encouragement to true private enterprise." ( Marwick, Arthur, BRITISH SOCIETY SINCE 1945, Penguin, 1982.)

In its plan to privatize mass transit, the British government, like Weld's MBTA, started with buses. Recommendations in a 1984 Department of Transportation (DOT) White Paper were made law in the 1985 Transport Act, and first implemented on October 26, 1986. Transportation researcher Marcus Enoch, of the Open University at Milton Keynes, describes the three resulting forms of bus transit organization as, "complete deregulation outside London, pre-deregulation style in Northern Ireland/Ulster, and route franchising in London." The 1984 DOT White Paper stated that complete deregulation would set the bus industry "free to give better service to the passenger at less cost to the ... taxpayer." This 'setting free' had three major components:

• Suspension of most local control of mass transit through planning and regulation;
• National and municipal bus companies were broken up and sold to private operators; and
• Exclusive licenses for operating bus routes were no longer granted.

Unrestrained competition

Routes with enough volume to incite competition suffered the greatest and most frequent upheavals: "Say a popular route had a bus at half-past the hour," Smithson recounted. " A rival company would then put on a bus at twenty-five past, and take all those passengers. The first company would start running a 'special' bus three minutes before that one, and all the riders would get on it. So you'd have three buses coming within an eight minute interval, and none for the rest of the hour." Racing with each other to scoop up the maximum riders on heavily- traveled routes, the private operators neglected other routes, or abandoned them altogether, leading to a collapse in service and public outcry.

Enoch has chronicalled the experiences of Darlington, the town which saw the most "outrageous manifestations" of what Enoch calls the "bus wars." Darlington has a population of about 97,000, roughly the same as Cambridge, Massachusetts, but only a third of whom have access to cars. There, he says, "the former municipal operator and the former National Bus Company subsidiary competed very strongly for business" against each other until reaching an agreement in April, 1993 to keep competition within "reasonable limits." A month later, a third operator moved into town, and the "war" reignited:

The first full day of the renewed 'bus war' services saw queues of buses of all three companies stretching for 400 m[etres] through the town center. Many unsavory aspects of "on the road" competition were in evidence, Timetables were disregarded and buses frequently altered routes... depending on what the opposition was doing. Buses cut in front of one another, went up one way streets the wrong direction, ignored passengers standing on less well served stops to get to the more lucrative stops first.... At bus stops... buses sometimes waited far longer than they were supposed to ... even changing their display and moving up to another stop where passengers were waiting. Conditions for some residents became so bad ... that in mid 1993 the inhabitants of one street barricaded the road, and refused to let any buses through.

At this time there were three hundred bus movements an hour along Darlington's main shopping street. The great majority of these buses were almost empty. The carriers were seeking not so much passengers per se as market share.

Darlington's wild tale continued with insolvencies, hostile and friendly takeovers, charges of driver poaching, and the running of free buses by a particularly aggressive aspiring entrants into this exciting open marketplace of transport. The former municipal bus company went out of business, suffering heavy losses. The British Government responded by granting local authorities greater powers to regulate bus traffic. Complaints were lodged regarding competitive practices in Darlington, and the Office of Fair Trading investigated. With this new leverage, Darlington's county government was able to "persuade" the remaining operators to agree to a rational network of services for the town, which reached bus armistice on March 26, 1995. Displaying classic British understatement, Enoch concluded that "this case...illustrates the...possible need for a more effective regulating body than that of the current system."

"Controlled privatization"

When the Tories deregulated the rest of Britain's buses, they specifically excluded London, deeming it "not yet ready." The resulting delay in privatization meant that bus service in the capitol was spared the disruption that occurred in many northern cities. Perhaps chastened by those experiences, the Tories returned to their more usual method of privatization. London Transport's bus system was broken up and bid out to approximately thirty different operating companies by 1994, and the government was again asserting more control over the bus business. London Transport continues to have some responsibilities over the private operators. At the outset of privatization, it issued a "London Bus Passenger's Charter," making stringent reliability commitments.

Competition for passengers on popular London routes has been forbidden. Operators must, at least in theory, provide services on the less profitable, less traveled routes in their areas as well as the high volume, high profit ones. Government regulators now set requirements as to the frequency with which buses must be run. The new structure has thus been made to resemble the old public system, except that it is run by profit-taking companies. Not surprisingly, bus fares have risen 29.2% in London. This compares with a 48.9% rise in fares in Britain's other metropolitan areas, and an 8.8% rise in the rural counties, where fares were already higher than in the urban areas.

How profitable is the bus business in Britain? "We have a big automobile dealership, Cowie, that got into the business of running bus lines," Smithson told me. "Although [Cowie] do a huge trade in automobiles, they've continued to go round buying up bus lines, because they're far more profitable." Revenues have been kept up by raising fares, lowering employee wages, or in some cases, both.

Smithson also gave the following example from the northern industrial city of Sheffield. There, managers in the public bus company joined a consortium with bus drivers to purchase the business when it was sold off by the government. Bus drivers' wages were guaranteed during their tenure, and they were given stock in the new company to sweeten the deal. The employee- owned outfit then resold the bus business to another company for a huge sum, at an enormous profit. This older generation of bus drivers will do very well from the deal, but the buyer firm will have to pay future drivers less, and charge riders even more, in order to recoup the enormous capital costs of purchasing the company.

The other option would be to reduce service, of course. Service and other long-term considerations tend to get short shrift from U.S. pundits who urge Sheffield-style solutions as a way to "sell" privatization politically. (See, e.g., "Privatization Logic: Divide the Spoils and Conquer the Opposition," WALL STREET JOURNAL, September 13, 1996.) Among the unanticipated long-term consequenses of bus privatization in Britain was that two of the nation's bus chassis manufacturers went out of business within the first few years of the process, as the new private companies were neither buying nor ordering new buses.

The upheavals in British transportation service continue. In February, 1995, the privatization of train service was initiated. The Central Rail Users Consultative Committee, Britain's largest organization representing train passengers, reported in August, 1996, that complaints to user's groups about late, cancelled, and overcrowded trains were up by 50 per cent since the start of rail privatization. Public confidence in its formerly public mass transit system is diminishing. One suspects a connection between the deterioration of mass transit and the extraordinary increase in automobile ownership and use throughout Britain. There are fewer bicyclists, formerly ubiquitous, on the increasingly busy roads. The Youth Hostels Association now advises traveling youth groups to charter their own buses rather than deal with the vagaries of the privatized railways.

The environmental impact of the upsurge in automobile use is, on some days, visible in the air of urban centers in a country with much less stringent fuel quality standards than the U.S. There are now epidemics of pediatric asthma in some boroughs of London that border the Thames, where thermal inversions hold the hydro-carbon-filled air against the river banks. The air quality decline is especially sad, considering the great improvements made just a few decades ago with elimination of the burning of low grade coal. The impact of increased auto traffic also shows up in newspaper articles like "Street turfs out cars in quest for green peace,"( The Guardian, 8/17/96/), "Country lanes heading for gridlock,"( Sunday Times, 8/18/96).

The press also reflects an aspect of increased automobile traffic to which Britons have not yet become desensitized: auto fatalities. This is a nation which recently saw organized marches and other commemorations of the 100th anniversary of the death of the first British pedestrian to be killed by an automobile. Even in the serious press one sees articles with titles like "Will you kill a child today?" (The Guardian, Aug. 17, 1996, Outlook p.1) and "The car as mass murderer,"(Guardian Society Supplement, 8/14/96, pp.4,5). The sensationalistic press is far more lurid.

One has to question who in Britain has benefitted from transit privatization so far. The Tory government enjoyed a cash infusion from the sale of franchises and property, but may ultimately suffer politically: there are polls that show that 80% of the population oppose privatization. Transit users are experiencing what Times of London transportation reporter John Prynn calls "an alarming deterioration in services." Even if the move of more Britons into cars is in response to temporary upheavals in the transit system, it is unlikely that these new drivers will ever return to the transit system as riders, even if service improves.

The same thing could happen here. As it stands, the current MBTA bus privatization plan is styled along the lines of London's private-operators-under-public-regulation system, sometimes referred to as "route franchising". The "Request for Proposals for Operation and Maintenance of Fixed-Route Bus Service" (RFP) issued by the MBTA in August, 1996, solicits bids for running one or more of five "service bundles" of bus routes at a fixed price per "revenue service hour," over the term of a five-year contract. Representations have been made to the public that fares will not be increased, services reduced, nor schedules altered. Little mention is made of these subjects within the RFP itself, which states only that "the MBTA will retain authority over the design and final content of schedule and timetables"; "the Contractor shall comply with all the performance standards agreed to by the MBTA in its 1994 Service Quality Report"; and "the contractor shall vacuum fare revenues from each bus farebox" and turn these over to the MBTA.

Many within the administration are candid that expected cost savings are expected to come out of the wages of the roughly 2,000 people employed by the MBTA in bus operations, about 1,500 of whom are bus drivers. If bus operations are awarded to a private contractor, these employees will lose their jobs and the benefit of their union's collective bargaining agreement with the MBTA. The state's privatization law (Chapter 296 of the Acts of 1993, the so-called Pacheco Bill) expressly provides that contractors taking over state services must offer employment in the contracted work to former public employees whose jobs have been terminated because of the privatization contract. The Weld administration apparently believes that eliminating the jobs of its workers and offering their services, at reduced pay, to a new employer will not affect bus service.

The "no drop in services" pledge bears scrutiny for other reasons. A widely commented-upon phenomenon in Britain was the institution of service reductions just prior to privatization of a line or service. The private operator then took over at a lower level of service, and enjoyed the resulting economies. There is some evidence of such pre-privatization engineering here: when the June 22, 1996, schedule was issued for # 88 bus from Lechmere to Clarendon Hill, the # 88 rush hour service had been decreased from every twelve to every fifteen minutes, the first such service cut in memory. Service on other lines has been decreased in a similar manner.

Hardly anyone of political consequence is likely to be troubled or inconvenienced by such service cuts. Buses are, let's face it, the third class carriages of mass transit. Suburbanites who use mass transit enjoy the relative luxury of commuter rail. Urban dwellers with the economic means tend to live as close to subway stations as they can afford. Most working-class people who can afford options shun bus riding as a low-status activity. Buses primarily serve the poor, the elderly, people unable to drive for reasons of health, low-pay workers, students, and some handful of people who actually find buses convenient, or are motivated by environmental concerns, and feel secure enough about themselves not to be deterred by status considerations.

True economies of bus privatization would include service cuts already instituted, wage reductions for workers, and whatever other cost-savings measures the new operators discover they can introduce. Regardless of accompanying rhetoric and promises, these changes represent a massive disinvestment in the bus segment of public transportation, even as the Weld administration pours money into commuter rail expansion. Transportation Secretary James Kerasiotis insists that bus privatization is essential, because the state can't go on subsidizing the MBTA. Yet Weld's proposed $250 million commuter rail line to New Bedford and Fall River will require an ongoing state subsidy estimated at $12,000 a rider per year, or $45 a rider per day for the next 30 years. ( Norman, K. and Luberoff, D., What price, new rail line? Boston Globe, Jan. 15, 1996, p. 16.)

Advocates of privatization have not addressed the service impacts of disinvestment, or the seemingly inevitable alternative of raising fares. The MBTA's bus privatization plan blandly assumes that, except during the first six months of "transition," service will be maintained at current levels. The adequacy of these current service levels is debatable. One must also wonder whether a less experienced provider, even with a staff of more or less demoralized former MBTA employees, could provide current levels of service with fewer resources than the MBTA applies now. A private contractor will have higher costs for insurance than the MBTA enjoys, and will be paying taxes on its earnings, assuming it can make a profit. The three extensions of the MBTA's bid deadline suggest that few, if any, operators may be willing to make this gamble.

Although the MBTA's bus operations contract incorporates its service standards, contains penalties for service drops, and retains a right to terminate the contract for noncompliance, the MBTA will be gambling on a private contract, too. What if an operator comes in and can't perform? Last year, for instance, the state terminated the contract of its private Medicaid managed care company for mental health services, due to unsatisfactory performance. Performance failure by a private bus contractor could have more of an impact on local transit service than October's flood did. The MBTA has not, at least publicly, addressed the question of how much more bus service can be degraded before the system loses such remaining voluntary riders as it still has.

Employed people, even students, who need to get places on time will eventually react to bus service which is infrequent, chronically overcrowded, or bears little practical relationship to its official schedule. Some riders, contemplating the amount of pigeon droppings on the rare benches in the rare bus shelters, may conclude that the MBTA just doesn't care about them or their business any more, even if adverse conditions are confined to a six-month "transitional period". Many of these aggrieved customers will have little choice but to buy automobiles, and the buses will slow down further in the increasing traffic. The British experience suggests serious attrition related to service disruption, and decline in demand must surely raise system costs.

John Deacon of the Sierra Club refers to the #49 bus that provides "temporary replacement service" for the erstwhile elevated Orange line along Washington Street as a "social service bus." MBTA buses in general are increasingly in danger of becoming a social service transit system, the last resort of those who have no other way to get there. It is possible to drive the middle class off the buses -- by taking bus drivers out of the ranks of middle-class wage earners, as well as by offering a transit experience that middle class people won't put up with. It would not be the first time that disinvestment in urban services gave the middle classes one more reason to abandon the inner city. Has this phenomenon been quantified in the administration's cost/benefit analysis of bus privatization?

The MBTA bus system is in a precarious state now. Besides real and perceived reductions in numbers of scheduled and on-time buses, there are those tougher-to-quantify areas such as bus and station cleanliness, availability of printed schedules, and of route and schedule information generally. All are on the decline, and it's not a good sign. There's more to transit service than a warm internal combustion engine, as can be seen in the example of Britain's transit privatization program.

It may be, of course, that the Weld administration is not serious about its own privatization agenda. Reports in late September of secret talks between the MBTA and the Carmen's Union gave rise to speculation that the bus RFP was just a way to force the Union to bid against its own collective bargaining agreement in an effort to save jobs. In October, the U.S. Labor Department warned that the MBTA's privatization plan could jeopardize its eligibility for federal transit funds, suggesting that the stakes were even higher than supposed, and that the state could be a loser. Despite generous extensions in the MBTA bid deadline, the Weld administration is again sending mixed signals about its commitment to privatization. It's time the public made itself heard on the issue.

copyright 1997 Denise Provost