NEWS ANALYSIS : Privately Run Foothill Transit a Strike Winner

Whether the Metropolitan Transportation Authority or its unions claim to have prevailed in their conflict, the fight already has another winner: Foothill Transit.

Foothill’s name may be unfamiliar outside the Pomona and east San Gabriel valleys, where it operates 21 local and express bus routes with about 10.7 million boardings this year.

But the agency’s interests--further privatization of MTA services--have been a major factor in the county’s first transit strike in more than a decade. And the transit unions’ failure to stave off further contracting out of MTA services has created new opportunities for Foothill, MTA’s largest contractor.

Under agreements struck a week ago with bus drivers and clerks, MTA will turn 13 more bus lines over to private operators. The terms of the tentative agreement with the mechanics, reached early Monday, were sketchy, but MTA officials said it would not interfere with plans to privatize the lines. All the agreements still must be ratified by union members.

“People think this strike is over contracting,” said one board member, who asked not to be identified. “But it’s really over contracting with Foothill. That’s all the pro-contracting-out forces on the board really care about.”

Foothill Transit began operating in 1988, when it took over 14 bus lines from the Southern California Rapid Transit District, which since has been merged into the MTA. Today, Foothill operates 200 buses as the county’s second-largest transit agency and has proposed a takeover of additional MTA lines.

County Supervisor Mike Antonovich, who also sits on the MTA board, says he would like to see agencies such as Foothill established in the San Fernando Valley, on the Eastside and in South-Central Los Angeles. Ultimately, the massive MTA would operate a fraction of its current lines and function mainly as a contract manager.

Contracting arrangements such as Foothill’s, Antonovich says, work because they are “free of the sweetheart contracts of the former RTD, with their featherbedding and work rules that are contrary to the interests of the taxpayer and rider.”

“Contracting out” is the euphemism that elected officials use to describe the increasingly popular practice of allowing private companies to bid on the provision of basic services traditionally rendered by public employees. Big-ticket items with high labor costs, such as transit and trash collection, are favorite targets.

Nationally, Phoenix’s competitive system of refuse hauling is one closely watched example of this process, which often is called privatization. Foothill Transit is another. To many who have watched their progress, these two experiments are a window on the future of many traditional public services.

What you glimpse through that window, however, depends on your angle of view. To elected officials struggling to live within ever-tightening budgets, Foothill-like entities point the way to a new era of affordable, flexible, efficient public services. But to the leaders of organized labor and their dwindling number of sympathizers, that era is one in which budgets are balanced by pushing an increasing number of public employees down the economic ladder to the rung occupied by the working poor.

Foothill’s experience seems to vindicate both views.

Foothill is neither a traditional public transit agency nor quite what the libertarian theorists who conceived the privatization movement had in mind. Rather, it is a hybrid of the public and private sectors. Its policies are set by a “joint powers authority” consisting of 20 small cities in the Pomona and east San Gabriel valleys and Los Angeles County.

Representatives of all the authority’s members meet once each year to approve a budget and to elect a five-member executive board.

Foothill Transit itself has no employees. All of its work--from management to maintenance--is done by private contractors. The 30 people who comprise Foothill’s entire administration all work for Forsythe and Associates Inc., a West Covina-based transportation and management firm, which is paid $2 million a year by Foothill to run the bus company. The agency leases its buses, which are driven and maintained by two other private transit companies, Laidlaw and Mayflower.

Sharon Neely, now a private transit consultant, was the Los Angeles County Transportation Commission staff member who worked on the formation of Foothill in the mid-1980s.

She says that, so far, the experiment “has been extremely successful. It has caused no layoffs in the public sector. Fares are lower for its riders and it has added service in the San Gabriel Valley, which needed it. More important, the constituents are happy because they’re getting better service.”

Even a cursory look at Foothill’s service tends to bear Neely out. The agency’s buses--all of them relatively new--are clean and free of graffiti. Surveys have recorded a high degree of rider satisfaction.

Foothill’s economic statistics are even more striking: By its own reckoning, it costs the agency $55 per hour to operate its buses, as opposed to $93 for MTA. While MTA recovers just 32% of its subsidies by collecting fares, Foothill recaptures 48%. Foothill’s basic fare still is 85 cents, while MTA’s fare is scheduled to increase from $1.10 to $1.35. Foothill has an excellent safety record, with just 0.3 accidents per 100,000 miles traveled; MTA’s rate is 3.3, 100 times higher. (Some, but not all, of that discrepancy probably is attributable to the fact that MTA operates an older fleet of buses over more heavily congested local routes.)

With its relatively tiny staff, Foothill allocates less than 3% of its budget to administrative costs. Public sector executives who oversee private contractors generally agree that spending 10% or less on administration is an excellent economy.

But the foundation of all these economies is a wage structure for drivers and mechanics that is roughly half MTA’s. The public agency pays its drivers an hourly average of $18.45, while Foothill’s contractors give their drivers--all of whom are represented by the Teamsters Union--$11.

Moreover, not everyone accepts such comparisons at face value. MTA board member Marvin Holen says he believes Foothill’s operational statistics are “wildly inflated.” Holen, who bases his reservations on informal analysis by MTA’s staff accountants, cannot provide numbers of his own. But he is asking for a complete and impartial accounting.

Such skepticism has dogged Foothill since its inception a decade ago. At that time, the RTD simultaneously announced a 50-cent fare increase and a reduction of service in the San Gabriel Valley. The county supervisor representing the area at the time was Pete Schabarum--a longtime advocate of privatization and an implacable foe of public sector unions. He refused to accept the cuts and set in motion the process that created Foothill.

To assist him in the process, Schabarum brought in transit consultant William P. Forsythe, who had directed transportation for the 1984 Los Angeles Olympics. Today, Forsythe, who is widely regarded as the “architect of Foothill Transit,” is president of the company that has the contract to manage the district.

He and Foothill’s major contractor, Laidlaw, are consistent players in MTA’s internal politics. Over the past two years, they have contributed more than $10,000 to members of the MTA board. Los Angeles Mayor Richard Riordan, who sits on the board and appoints three other members, has received $2,500. The mayor, whose former law firm represented Foothill when organized labor unsuccessfully challenged its formation in court, is a longtime advocate of contracting out. Along with Supervisor Antonovich and Duarte City Council member John Fasana, Riordan has emerged as a strong advocate for Foothill on the MTA board.

According to one source familiar with the board’s deliberations, the board’s loyalty to Foothill was a major factor in the contract talks with unions representing the drivers and clerks. “We weren’t just talking about the MTA and its unions,” the source said. “We were talking about the MTA, the unions and Foothill. Some people mentioned them by name, others talked about ‘contracting out.’ But everybody in the room knew that what they really were talking about was Foothill.”

At one point, Riordan pushed through a motion instructing the board’s negotiator to return to the drivers union, which already had agreed to cede 13 more local lines to private contractors, and ask them to give up nine local and four express lines. At least one point during discussion of the motion, Fasana conferred with Foothill managers by phone.

“It was understood,” the source said, “that all those lines would go to Foothill.”

A spokesman for Antonovich insists that no decision has been made.

When the union rejected the new proposal, Riordan--in hopes of avoiding a strike--backed away from his proposal and voted with the majority to accept the original agreement. But five board members--Antonovich, Fasana, county Supervisor Deane Dana, Glendale Mayor Larry Zarian and League of Cities representative Raul Perez--voted to stand firm on the express lines.

“Those guys in the pro-contracting faction were willing to take a strike if it helped Foothill,” the source said.

Clearly, performance as well as politics have won Foothill such adherents. The question remains: Is that performance based on more than cheap labor?

Forsythe, who was “present at the creation,” argues that economies of all sorts were built into Foothill’s structure from the start. “We realized accountability was the key,” he said.

“So, we decided we’d have the public sector govern this new agency and the private sector run it. We’d use the strengths of each. Government doesn’t run business well. It doesn’t force innovation or get rid of what’s no longer useful. Government does a good job of setting policy. The private sector does a terrible job of setting policy for the public good. All it wants is competition advantage. But it does a very good job of innovating and saving money and getting the job done.”

Mike Lewis, formerly Schabarum’s chief of staff and for five years a Foothill director, believes that the agency’s success has something to do with its manageable scale. It is, he says, “the optimal size. In transit, there are no economies of scale. The bigger you are, the faster you go into the hole.”

Union officials insist that Foothill’s apparent gains have been made on the backs of workers. And that, they say, raises critical public policy issues.

Goldy Norton, a spokesman for the United Transportation Union, which represents MTA’s drivers, said Foothill does not pay a living wage to its workers.

Foothill drivers, he said, “are not making it on what they are being paid. . . . And what people don’t understand is that the taxpayer ends up paying anyway.”

“Members of our union get good salary and benefits,” Norton said. “They’re not on any government subsidy. But people who work for the subcontractors do on many occasions get subsidies. They are the working poor who need social assistance. So (the MTA) may be saving transit funds (by contracting out), but taxpayers still end up paying the bill.”

Forsythe counters that the $20,000 per year earned by a typical Foothill driver “isn’t bad for a service industry job. . . . Is our wage fair? Not compared to MTA, but they’ve been overpaying for years.”

Keeping Things Running

The Foothill Transit Service Corp. is a nonprofit company contracted by the Metropolitan Transportation Authority to provide service in the east San Gabriel Valley. Foothill buses primarily run on the San Bernardino Freeway.

Comparing Costs

How much it costs per hour to operate the various transit systems in Los Angeles County. LADOT (DASH): $47 Santa Clarita: $49 Antelope Valley: $51 Torrance: $52 Santa Monica: $52 Long Beach: $54 Foothill: $55 Culver City: $60 Commerce: $61 Gardena: $62 Montebello: $63 Norwalk: $70 MTA: $93 Fiscal year 1992-93

Note: The Antelope Valley, Foothill and Los Angeles Department of Transporation systems are privatedly owned.

Source: Foothill Transit Service Corp.