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Taken for a (Bus) Ride

For years, people have argued about who really runs Phoenix. The mayor? The city manager? City Council?

But when it comes to city buses, the answer is all too clear.

It's a bunch of French businessmen.


Veolia Transportation


As it turns out, most of the municipal buses in Phoenix, as well as the shuttle service at Sky Harbor, are run by subsidiaries of a French-based conglomerate named Veolia. That company makes its living by handling the municipal details that typically bore politicians to tears: trash removal, transportation management, and shuttle service.

Naturally, the company does it all for a fee. And in Phoenix, that fee just got a whole lot bigger.

That's even though the satisfaction reported by local bus riders, according to the city's own survey, is on the decline. And that's despite the fact that city staffers didn't bother to get a quote from a single Veolia competitor.

After looking at a half-dozen boxes of records and talking to a number of people, it's clear to me that the system here failed completely.

That's because Veolia had every incentive to win bigger contracts for itself, but no one at City Hall put any energy into stopping it. City staff drafted the deals. The city manager signed off on them. The mayor and council rubber-stamped them.

The upshot is that, this summer, Phoenix agreed to increase Veolia's management fees by a collective $7 million on its two contracts — without shopping around.

By my calculation, Veolia is getting a 79 percent raise.

Kind of makes you want to get into the bus business, eh?

Here's the truly pathetic part of the city's renewal with Veolia for bus service.

Under the old contract, Veolia's entire $850,000 management fee was tied to its performance. Was it on time on certain routes? Did it properly serve customers with disabilities? If Veolia screwed up, the city docked it. In recent times, that meant the company lost out on more than $100,000 a year — pretty good incentive to kick it up a notch.

The new contract greatly decreases that accountability. No matter how badly the company performs, in fact, it stands to get $850,000 a year. Then, on top of that, the company is eligible for a $150,000 bonus, the only part of its fee now linked to performance.

That change comes even as bus riders in Phoenix are less and less happy.

According to the annual customer poll commissioned by the city, overall satisfaction with bus service dropped 5 percentage points in 2006. Satisfaction with the buses' cleanliness dropped 24 percent. Satisfaction with on-time performance was down 30 percent.

Now, we Phoenicians are all facing problems with "on-time performance" in this era of orange barrels and endless construction zones. But the company's scores are down overall — and you certainly can't blame dirty buses on the light-rail fiasco.

Really, nothing in the city's most recent survey justifies giving the company a no-bid renewal, particularly one with more money and less accountability.

Still, that's exactly what happened. City staffers recommended that the city re-up with Veolia in April. In June, the City Council approved the contract renewal, and the fat raise, without much of anything in the way of discussion.

Not a single person on the council even bothered to vote against the thing. And the council proved just as vigilant with the company's airport shuttle-service contract.

That contract wasn't due for renewal for another three years. But that didn't stop city staffers from altering the contract to give Veolia more money. They recommended a retroactive fee increase for Veolia — one that will earn the company roughly an extra $1.5 million a year. That's an increase of 136 percent.

Once again, the Council signed off on the deal last month without a single "no" vote.

One month before city staffers made their pitch to give Veolia these sweet perks this spring, a host of local Veolia executives — nine in all — donated a total of $3,200 to Mayor Phil Gordon's re-election campaign.

As Gordon stressed in an e-mail to me, that's not a lot of money in the scheme of things. After all, he's sitting on a war chest of nearly $1 million.

But it's nothing to sneeze at in this world of so-called clean elections and strict contribution limits. Seven of the nine Veolia execs, in fact, gave Gordon the maximum permitted by law, $390.

I can't say that there's anything nefarious going on. But I can say this: The timing stinks.

Gordon says he never discussed the contract renewal with his Veolia contributors, much less the staff that put the deals together.

"I did not talk to anyone about these contracts before [City Manager Frank Fairbanks] came to brief me on the staff recommendations for a number of agenda items," Gordon wrote. He added, "Our system isn't a system where mayors and council members lobby staff to do this or that. It is the exact opposite — staff comes to the mayor and council to tell us what they are recommending we do."

Fair enough. But that makes me wonder something else: Why even bother to elect a mayor and a council if all they're going to do is rubber-stamp the recommendations of the city bureaucracy?

Again, we're talking a collective 79 percent on Veolia's two management contracts, without any competition for the work! And while it's conceivable that harried midlevel staffers might sign off on deals like this, I can't imagine how an elected body of supposedly intelligent people could approve them both, unanimously, particularly in an election year.

Legally, they covered their tails, of course. When the city negotiated that shuttle-service contract, they gave the contractor the right to come back in a few years and renegotiate. Brilliant — and the next thing we know, Veolia managed to double its fees. (The city's assistant aviation director, Carl Newman, tells me that since the service was new a year ago, they hadn't known what to expect. "This has been fully audited, and we're confident we're doing the right thing," he says.)

The bus-service contract was trickier. Federal regulations generally require cities to get proposals from multiple companies, not just re-sign with the same company as usual — even if that company is mighty friendly.

The feds allow an exception if only one vendor is qualified for the work. The city's deputy transit manager, Al Villaverde, admits that wasn't the case here.

"We acknowledge there are several other companies that could do this service," Villaverde tells me. In fact, two of them put in a proposal for the contract in 2002.

Instead, Villaverde says, the bus-service contract was a case of "special circumstances."

They were adding bus routes. And hosting meetings to unveil those routes. And planning a new $15 million transit center.

Basically, as Villaverde admits, "It was a very busy year, and we just weren't staffed up enough."


The city transit staff was too busy to, well, do their jobs.

And the city politicians blindly followed the advice of the way-too-busy transit staffers.

No wonder the French were able to triumph!

It's pretty clear that was the city's intention all along.

Here's how I know that. If cities skip the whole multiple-proposal thing, the Federal Transit Authority strongly suggests they perform a detailed cost analysis to make sure they're not getting hosed.

Phoenix did, in fact, do one for this bus contract. But I'm not sure why they bothered.

First, the analysis compares Phoenix with only three other entities. One covers a big area in California. But the other two aren't even close to comparable size. Raleigh, North Carolina, is bad enough — but it's an enormous metropolis next to the third place on the list, Florida's Escambia County. That place barely tops Glendale in population.

Even worse, all three entities contract with the same company for bus service. And if you guessed that the vendor in question is Veolia, well, come right on down for your free Betamax.

So the city decided that Veolia's rates were reasonable compared with, well, Veolia's rates. I love it.

And I love this part even more: As it turns out, the auditors didn't finish their report until June 22.

That's two months after the thing sailed through two different committees, and more than a week after City Council formally approved the deal.

I'm not a conspiracy theorist. But the timing is clear: No one at City Hall really questioned whether they were getting the best deal. Instead, they decided to re-up with Veolia — and only after that did they bother to track down some data to support their decision.

That decision might not matter if we, the taxpayers, weren't footing the bill. Or if only tens of thousands of people didn't depend on Phoenix's bus service.

Dianne Barker is one of them.

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A gadfly who's long focused on public transportation, Barker is also one of those rare Phoenix residents who really does depend on the buses. And, with two fellow local activists, she's filed a formal protest against both contracts with Veolia.

"We've got no bidding, no competition, and no oversight," she tells me. "Every time the contractor asks for a change order for more money, the city just pays it."

Barker concludes: "These contracts are ripping off the public."

I couldn't have said it better myself.

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