Competitive Contracting of Bus Service Is Not Union-Busting; It’s Monopoly-Busting

When Mayor Tom Bradley and Supervisor Pete Schabarum reached agreement on contracting out the San Gabriel Valley’s transit service in December, transit unions responded in force. They attacked the arrangement as anti-labor and filed suit seeking to have the San Gabriel Valley Transit Zone declared illegal.

Most news coverage has given the impression that Schabarum and the Los Angeles County Transportation Commission are foisting some kind of untried scheme on San Gabriel Valley residents. In fact, competitive contracting is a proven approach toward getting greater value for the transit dollar. Consequently, it has been spreading across the country, with the encouragement of the federal government.

In 1987, for example, the Urban Mass Transportation Administration launched programs in Des Moines, Minneapolis/St. Paul and Little Rock to implement competitive contracting in not just a single district but citywide. It is expected that virtually all transit services in these cities will be opened to competitive bidding by private firms over the next few years. UMTA has also funded pilot contracting projects for selected transit services in Miami, New Orleans, Cincinnati and Austin.

A major legislative battle in Colorado last spring led to a compromise bill in which an initial 20% of Denver’s transit services will be contracted out over the next two years. When the first bidding took place, for 45 buses, eight companies submitted proposals. The winning bid came in at $28.25 per revenue hour--43.5% less than the existing service by Denver’s public bus system.

That kind of cost savings is fairly typical and goes far to explain the appeal of competitive contracting. Here in Los Angeles, 16 bus lines dropped by the Southern California Rapid Transit District in recent years have been contracted to private operators at 38% less cost. And savings on two more recently contracted services came in at 50% and 60% less.

Transit unions like to argue that such savings come at the expense of unionized drivers. But transit expert Wendell Cox puts that claim in perspective. He points out that public transit costs since 1970 have increased by more than 64% after inflation. That’s more than twice as much as medical costs! Labor costs are more than two-thirds of the cost of public transit. And it turns out that bus drivers at the 40 largest public transit agencies are paid more per hour than employees in any major industrial classification. Public bus drivers make 54% more than the average salary for all full-time American workers--more than the average manufacturing worker, miner or construction worker.

A major factor is that public transit fringe benefits are 48% of wages compared with 25% for the average worker. And since bus drivers have much higher wages to begin with, their fringe benefits are more than three times those of the average American worker.

There is nothing in the nature of driving a bus that requires such high compensation. Indeed, bus drivers outside the public sector make far more modest sums. The private bus industry, with more than 3,000 firms and 120,000 vehicles, pays competitive, market-determined wages and benefits. In contrast to public buses, where costs have gone up 64% in real terms since 1970, the private bus industry’s costs have actually declined 8% after inflation.

What explains the public transit sector’s high costs is monopoly. Managers like those at the RTD have little incentive to bargain aggressively, since they have no alternative source of supply. Competitive contracting provides that alternative, giving both sides atangible incentive for productivity and efficiency.

San Diego provides a telling example. Since the city began contracting for a small portion of its transit service in 1979, it has found itself in an increasingly strong position to gain efficiencies. By 1987, with about 18% of transit service supplied competitively, costs within San Diego Transit itself had declined 13% in real terms--compared with a 30% increase in public transit costs in the rest of California.

Critics like to charge that competitive contracting is “union-busting.” But many of the growing private bus operators are themselves unionized. Greyhound, which provides much of Dallas’ transit service, has contracts with the Amalgamated Transit Union. And Laidlaw drivers in Los Angeles are members of the Teamsters.

Competitive contracting, nationwide and here at home in the San Gabriel Valley, is not union-busting; it’s simply monopoly-busting. It’s a way of giving taxpayers full value for the dollars they spend subsidizing public transit. Because those dollars are scarce and public transit is important to our future, it’s important that we make these dollars go as far as possible.

So Mayor Bradley and Supervisor Schabarum were not making a rash decision when they agreed to let the San Gabriel Valley Transit Zone proceed. They were selecting a proven method to give riders and taxpayers more for their money. Let’s hope the courts agree when the union’s suit is heard in April.