Phoenix taxpayers have lost out on millions of dollars from Veolia Transportation, fees the corporate giant would have paid had city officials not given its executives a four-month pass on poor-performance fines.
In October alone, the company that operates Phoenix city buses racked up nearly $560,000 in fines, mostly for arriving late to bus stops. In July, August, and September, Veolia's tab was more than $3 million, according to city documents.
However, transit officials tell New Times that a system glitch produced inflated fines for the first three months. In September, for example, an initial tally shows that Veolia amassed $1,091,369.18 in fines. A revised version of that report drops the amount to $559,081.
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That means that instead of $3.5 million, the French transportation company dodged a bill for more than $2 million — still a sizable chunk of lost revenue for a cash-strapped city that has reduced bus service in the wake of budget shortfalls.
Transit officials say the money would not have made a difference to the average bus passenger in the short term.
Since transit operations are largely funded by special city sales taxes, Phoenix public transit director Debbie Cotton says, the money would have gone toward shoring up the city's budget deficit — $142 million as of January — caused by declining tax revenue.
The majority of the fines Veolia would have gotten slapped with are for late buses. For example, buses showed up late — for various reasons — to bus stops at least 57,000 times in those four months.
If a bus is six minutes late, that's a $20 fine. The company pays $40 if a bus is 10 minutes late. The fines for late buses top out at $250 each time a bus shows up more than 30 minutes late to a stop along its route.
Cotton says the fines are in place to ensure that bus patrons receive the best service, not as a way to make money off the company. She says she would be happy if the city didn't collect any fines, because that would mean customers were getting exceptional service.
"We don't want them to arrive early; we don't want them to arrive late," she says. "We want them on time. Time is important in the world of transit. And this is a way to measure their performance."
Although the four-month reprieve ended in October, Phoenix still hasn't collected any money from Veolia because transit officials say they are working out the kinks in the system that caused the initial miscalculation.
It is unclear how much Veolia will have to pay Phoenix for the past five months, but the money will be collected, Cotton stressed.
The forgiven fines are part of a complicated — yet cozy — relationship between Veolia and Phoenix officials, namely Mayor Phil Gordon.
Federal Transit Administration officials started questioning that relationship after New Times published "The Girlfriend Problem" (September 9), which revealed how Gordon helped Veolia muscle an extra $30 million from Phoenix to settle the old bus contract. That contract, also run by Veolia, expired on June 30.
It's easy to speculate about Gordon's motivation for lending a hand to the company, given that his girlfriend and former political fundraiser, Elissa Mullany, has been on Veolia's payroll as a consultant since 2007.
Mullany also was part of the team that helped prepare Veolia executives for interview panels, advising them on what questions to expect from the city and the type of responses the city wanted to hear.
While Gordon pledged his support for Veolia in June 2009, months before the City Council voted to award the company a $385 million contract, he declared a potential conflict of interest after going public with his romantic involvement with Mullany.
The mayor stopped participating on Veolia-related issues at public meetings, but he continued advocating for them behind closed doors, out of the public's view.
Gordon's close friend Billy Shields also is a paid lobbyist for Veolia.
Representatives for Gordon's office and Veolia both confirmed that the two met and discussed the Veolia contract, despite Gordon's conflict. During one of their meetings, the mayor advised Shields to tell his client to walk away from its Phoenix contract because city officials wouldn't agree to Veolia's demands for more money. When Veolia followed through and reneged on the contract it was awarded, Phoenix officials flew to Chicago, where they agreed to pay Veolia nearly $30 million.
Later, when the time came for the City Council to discuss that settlement in executive session, before a public vote, Gordon was involved in those discussions, two elected officials tell New Times.
Presumably, the feds are looking at the relationships to determine whether Veolia had an unfair advantage.
The feds asked another round of questions regarding Phoenix's contract with Veolia in early March, according to city e-mails. They wanted to know the terms of the contract and how much of it is funded by the FTA.
The 2010-11 portion of Veolia's $385 million, five-year contract, is $69.6 million, and the feds pitched in $15.6 million, or 22 percent.
Neither Leslie Rogers, FTA regional administrator in San Francisco, nor the agency's public relations office in Washington, D.C., will answer questions about their Phoenix inquiry.
In a five-page letter to the FTA, Cotton explained that the contract tied to the nearly $30 million settlement was not federally funded. She also wrote that Gordon didn't vote on the new contract awarded to Veolia and that elected officials had nothing to do with negotiating the $30 million settlement.
Gordon may not have been at the Chicago meeting, but his advice to Veolia certainly prompted it.
Cotton's letter doesn't mention Mullany's involvement as a consultant for Veolia. Nor does it address Gordon's meeting with Shields. Nor how Gordon weighed in during closed-door City Council meetings regarding the Veolia settlement.
Cotton, in her letter, says city officials and staff distinguished between the city's old bus contract with Veolia that expired last June and the new contract by treating them as "separate transactions and negotiations." She told the FTA that "no changes were made to the new contract," which is covered by federal funds.
It's a puzzling statement considering that the settlement agreement City Manager David Cavazos and other city officials hammered out in Chicago with Veolia executives clearly spells out the link between the two contracts and specifically calls for a change order to the new contract.
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For instance, as part of the settlement, Phoenix agreed to eliminate a $50,000-per-day fine that Veolia would have had to pay the city if bus workers went on strike.
And the city agreed that the moratorium on fines in the event of a strike would be "reflected in a change order to the new contract," according to a copy of the settlement agreement provided to New Times by the city.
Cotton says she was referring only to the initial negotiations, that obviously there were tweaks made to the fines outlined in the new contract that would be charged to Veolia.
"Sometimes when you're facing a hard decision, you have to reach a compromise," she says. "I would have wanted everything exactly the way I wrote it, but in the real world . . . we can't get exactly what we want."