(Updated with links to several documents, including Veolia's performance records)
Phoenix has given away more than $3 million - so far - to Veolia Transportation, a transit company that operates buses throughout the city.
It's $3,295,573.86, to be precise.
That's how much Phoenix would have collected in fines from the French transit company had city officials not agreed to waive four month's worth of penalties for things like late, broken or unkempt buses.
A significant savings for the Veolia executives who have Phoenix Mayor Phil Gordon's girlfriend on their payroll as a consultant and Gordon's good friend Billy Shields as a paid lobbyist.
And that $3.29 million tally only covers July, August and September, according to records obtained by New Times. Given that Veolia has racked up about $1 million worth of fines each month, it is likely that Phoenix also lost out on another million bucks for October.
A majority of the fines Veolia would have been slapped with are for late
buses. For example, buses showed up late to bus stops nearly 50,000
times in those three months.
If a bus is six minutes late, that's a $20 fine. Ten minutes late? That costs the company $40. Late-bus fines top out at $250 each time a bus shows up
more than 30 minutes late to a stop.
Phoenix put those fines in place to ensure that bus patrons received the
best service. City officials made it clear in the city-bus contract that those fines would be strictly enforced.
Why would it remove them for Veolia? What incentive does the company now have to provide quality service? And why would a
cash-strapped city agree to let revenue from a international corporation slip
through its coffers?
Phoenix Public Transit Director Debbie Cotton was out of town and unavailable for comment.
Based on city records, officials agreed to a "four month delay" of fines
"due to the change in the type of contract" Phoenix was using to
provide bus service (moving from a management contract to a fixed-cost
contract).
That statement makes it seem like the city made a last-minute contract change and Veolia needed time to adjust.
Not the case.
Phoenix agreed to waive those fines in May - at the same time that City
Manager David Cavazos brokered a deal to pay Veolia $27.5 million in
Chicago to settle out issues it had with Veolia's a previous city-bus
contract.
Veolia was well-aware that Phoenix was using a different type of
contract before the city even put its $385 million city-bus contract out
on the street for bids in June 2009.
In fact, when Veolia was going through the interview process in late
2009, prior to winning the contract, they touted that the city was
making the right decision by switching to a new type of contract.
(Phoenix previously operated under a management contract in which the
city reimburses a transit company for city bus service and tacks on a
management fee. Under a fixed-rate contract, the transit company gives
the city a flat, per-mile cost to provide bus services.)
It was an "appropriate response to the current financial situation" because
Veolia would take on the risk and also have better control over
cost-saving measures, Veolia execs explained to Phoenix transit
officials.
There are a few other things that don't add up:
In the settlement agreement that Phoenix and Veolia reached in Chicago,
city officials said they eliminated a $50,000-per-day fee that would be
assessed if workers went on strike "in recognition of the significantly
shortened transition period" for Veolia as it moves from its old
city-bus contract to a new one.
Consider, however, that Veolia was awarded the new city-bus contract in
January 2010, and already had six months to prepare - the same amount of
time the 11 other companies who bid on the contract would have had if
they had won the bid.
Or, you could go back to June 2009 when they first started competing for
the contract and that adds up to a year-long "transition period."
Also, Veolia touted its "unique" ability to provide an "orderly and
seamless" transition when it was vying for the Phoenix contract.
"We also believe that our relationship with our unions, our
understanding of the system and current services provides Veolia a
unique ability to make this transfer in an orderly and seamless manner,"
execs wrote in response to a question from Phoenix transit officials.
If Veolia has been providing bus service in Phoenix for about three
decades, shouldn't they already have a handle on how to transition from
one contract to another?
It's unclear why Cavazos linked the settlement of the old contract to the terms of the new one.
Despite getting what amounts to a $3-million-plus gimme from the city,
Veolia was still hitting up Phoenix for another $2.3 million to help
finalize a contract with the Amalgamated Transit Union.
Phoenix rebuffed Veolia, but union officials say they are being
pressured by company execs to also make a run at the city for the money.
It's ironic that when Cotton was asked by the Federal Transit
Administration to explain a conflict of interest raised previously by
New Times involving Veolia and Phoenix Mayor Phil Gordon, she said that
Phoenix chose Veolia because their bid was $14 million lower than any
other bidder.
What kind of money is Phoenix really saving when you start taking into
account changes it has had to make to appease Veolia? Figure on at least
$4 million in lost fines.
Since Phoenix also agreed - as part of the infamous Chicago settlement -
to allow Veolia to establish a review panel and challenge future fines,
it could be that Phoenix will forgo even more of those "strictly
enforced" penalties.
And how does the $27.5 million Phoenix paid Veolia to settle issues involving the old contract factor in to financial picture?
Sure, city officials say they reached that nearly $30 million settlement
to avoid a potential lawsuit from Veolia - but if Veolia hadn't been
awarded the new contract, executives would not have been able to use it
as leverage the way they did.