Bruce Murphy

Abele Dumps County Transit Company

Public bidding process awards bus contract to for-profit company.

By - Jul 29th, 2013 12:20 pm

County Executive Chris Abele has decided to award the $164 million dollar county transit contract to a new company, MV Transportation, and drop Milwaukee Transport Services (MTS), the non-profit operation that has run the county bus system for decades.

 “The same company has been running the Milwaukee County Transit System since 1975,” says Brendan Conway, Abele’s spokesperson. “This is just the way County Executive Abele does things, he wants to see what kind of deal the county can get. It’s the same as a homeowner who needs repairs, you check to get the best deal.”

At least one county supervisor, John Weishan, questions the switch in operators. “I find it hard to believe they (MV Transportation) would provide a better service at a lower cost. Our current contractor has won awards in the past for its operation of the transit system.”

Conway says the switch in operators “wasn’t a judgement on MTS,” but the MTS recently came under fire for its mismanagement of the county paratransit contract, which cost county taxpayers $8 million, and Abele made it clear this was a factor in his decision-making. “That was not a small problem,” he says, “that was a loss of millions of dollars that didn’t need to happen and it’s the taxpayers’ money.”

The not-for profit operator would be replaced by MV Transportation, a privately held corporation based in Texas, whose website says it “provides passenger transportation management, operations, and related services to jurisdictional and private entities around the world.”

This represents a major change for the county, which would replace the non-profit Milwaukee Transit System with the for-profit MV Transportation. MV Transportation, a privately held corporation based in Texas, whose website says it “provides passenger transportation management, operations, and related services to jurisdictional and private entities around the world.”Conway, however, downplayed its significance, noting that the county has been “privatized,” out-sourcing the bus system to a non-governmental entity, since 1975.

Milwaukee County Transit System Express Unveiling. Photo by Jeramey Jannene.

Milwaukee County Transit System Express Unveiling. Photo by Jeramey Jannene.

But Conway notes that “the county decides on the system’s routes and fares, etc. That’s not changing.” As for the bus drivers, they are unionized under a federal law that requires any system getting federal funding to allow collective bargaining. For this reason, Act 10, the 2011 law that ended most collective bargaining rights for governmental employees in this state, made an exception for bus drivers.

“The bus drivers have separate pension and separate health care benefits,” Conway notes, and are not treated as county employees.

However, once a new entity takes over, the contracts for all union workers would have to be renegotiated, and the new company may push for more efficiencies. Anticipating that, the bus drivers’ union, ATU 998, has been circulating a PowerPoint presentation opposing the move to a for-profit management firm.

When asked if he expected wage or benefit givebacks, Abele said “I honestly don’t know. I can tell you that was not the goal. The goal was better services and to keep fares down.”

Jackie Janz, a spokeswoman for MTS, says the bus system has more than 1,000 employees, most of whom are bus drivers, but also includes some unionized mechanics and clerical workers. All negotiate contracts with MTS rather than with the county.

Janz is among a small group (less than 100) of non-union employees in the MTS administrative office. Mike Giugno, serves as managing director of MTS and his predecessor Lloyd Grant Jr. earned $173,700. Grant recently resigned after the paratransit contract controversy arose, and Giugno, who was then the MTS deputy director, stepped up to managing director, and now earns about $156,000.

Conway cautions that the awarding of a bid is only the first step in the switch. From here, the county must negotiate a contract with the winning bidder. That leaves the possibility that the deal may fall through (and rumors had been swirling that the French company Veolia, which does work as a private contractor for the Milwaukee Metropolitan Sewerage District, was going to get the county bus contract), but Conway stressed that Abele expected to finalize a contract with MV Transportation.

In a statement released to the press on behalf of MTS, Janz said “We are disappointed in the recent decision made by the County and will continue to provide efficient and effective transportation services throughout the rest of the RFP process.” She noted that MTS had saved the taxpayers money in certain years when its operations turned out to cost less than the contracted amount.

About MCTS

Milwaukee County Transit System provides fixed route and paratransit service throughout Milwaukee County. The system provides approximately 150,000 rides every weekday. MCTS is funded from four sources: passengers and advertising ($56.5 million, about 35 percent of it budget), the State of Wisconsin (about 43 percent), the federal government (11 percent), and Milwaukee County property taxes (11 percent). Since its inception in 1975, the system has been privately managed by non-profit Milwaukee Transport Services. All of the buses, buildings, and other equipment are the property of Milwaukee County. MTS employees are not part of the Milwaukee County benefit plan.

The system today includes approximately 415 buses, traveling over 17 million miles a year. Over 300 buses are in operation during rush hour service.

Who is MV Transportation, Inc

The for-profit company began in San Francisco in 1975, with three vans providing transportation for those with disabilities under a contract with the city. Then called California MediaVan, it has since grown to become the largest American-owned, privately-held transportation firm, with executive offices in Dallas.

MV Transportation operates numerous transit systems, including a portion of the Valley Metro (Phoenix area) transit and paratransit system, the South Bay Lines of Los Angeles County’s system, all paratransit and a portion of fixed route service in Orange County, and a portion of the Maryland Transit Authority.

In June 2013, MV Transportation posted a job opening for a Transit Bus Operations Manager of a unionized fixed route/paratransit system. The application window ended July 2nd, and it seems a safe bet that the selected applicant will take over day-to-day operations of Milwaukee’s transit system.

The Future of County Transit System

MCTS faces a difficult future, regardless of who operates the system. The system is heavily reliant on state aid, which was cut ten percent in Gov. Scott Walker‘s 2012-2013 state budget. The latest state budget provided an increase in aid of four percent, still leaving a large shortfall. Milwaukee County made up the short fall over the past two years by re-allocating federal grants for the proposed Kenosha-Racine-Milwaukee commuter rail system. The federal grants, however, will expire in 2014 making future service cuts likely, unless Milwaukee County is able to persuade the federal government to grant an additional year of funding.

Despite the looming budget cuts, a number of system upgrades are in the works. A new farebox system, paid for in part by a stimulus grant, should arrive within the next calendar year, replacing an obsolete system of paper transfers that have been a source of controversy. Real-time bus location data will be made available by the end of the year, allowing a whole new suite of private applications to be developed that countdown bus arrival times. Most recently, a order of 55 new buses is arriving to replace buses that are over 10 years old (with more than 500,000 miles of service). The new buses will be part of a fleet of over 400 buses.

The Future of Milwaukee Transport Services

This non-profit company was created in partnership with Milwaukee County and does not operate in any other cities, so the loss of its contract with the county should mean MTS will fold. What happens to employees who work for the administrative office of MTS is in the hands of winning bidder MV Transportation, which could elect to hire back some employees, or employ a completely new staff.

Under the management of MTS, the system has won accolades for efficiency relative to peer systems, including the American Public Transportation Association Outstanding Achievement Award in 1987 and 1999. The non-profit recently came under fire (and ultimately triggered a highly visible bidding process) when the allocation of a paratransit contract was mismanaged due to scheduling issues, causing Milwaukee County to miss out on an estimated $8 million in savings.

Effect On Riders

Riders should not experience drastic changes as a result of the new management contract. The already-privatized system is ultimately under the control of Milwaukee County, which sets the routes, fares, and operating times.

Effect on Drivers

The group most likely to experience change are the drivers, who are likely to be pushed for more efficiency under a for-profit operator. Anticipating that, the bus drivers’ union, ATU 998, has been circulating a PowerPoint presentation opposing the move to a for-profit management firm. Members of the elected ATU 998 leadership team have recently been dismissed by the national organization following emerging details on the misappropriation of funds during the Gov. Scott Walker recall.

Categories: Politics

32 thoughts on “Abele Dumps County Transit Company”

  1. Stacy Moss says:

    So what is the deal?

    If this was a competitive bidding situation, then what is the bottom line other than punishing MTS for the loss of 8 million?

    Or are there any other aspects, like quality of service, that were considered?

  2. bruce murphy says:

    The full details won’t be known until contract negotiation is completed, but the bidding process was based on which company offered the most service for the lowest cost.

  3. Syeven Blackwood says:

    Does anyone remember when the for-profit company that ran the bus system prior to 1975 couldn’t hack it and the county took it over? Abele turns out to be not Walker-lite but Walker-large.

  4. Dave Reid says:

    @Syeven Is this good or bad I don’t know, but the reality is that for-profit companies manage transit systems all over the world today…

  5. Tom D says:

    The pre-1975 for-profit operator was, I think, “The Milwaukee and Suburban Transport Company” (or just “The Transport Company” for short).

    I think that MTS is a direct descendant of The Transport Company. If my memory is correct, they converted into a non-profit, started getting a subsidy and just continued running the buses with the same management. (Somebody correct me if I am wrong about this.)

  6. I can’t speak to the actual directors of the company, but you have the legal transition correct. Milwaukee County acquired all of the physical assets as part of the deal.

  7. Tyrell Track Master says:

    Very interesting. I don’t know enough about transit management to judge…. guess this is a wait and see kind of thing!

  8. Stacy Moss says:

    Inquiring minds want to know — are they going to run it into the ground or is there some vision for our County transportation system?

    Wouldn’t it be marvelous if actually improving the system was part of the conversation rather than how cheap we get it for? I mean, transportation is kinda important for city.

  9. Bob monnat says:

    So, for 11% of the current operating budget (the federal share), the system’s labor contracts have to be negotiated separate of all other collective bargaining under Act 10? Like it or hate it, if you don’t have some flexibility in labor discussions for an operation that is labor intensive, you won’t make meaningful change (good or bad) very quickly. The effect of the change is severely limited as a result, even if you subscribe to the “private sector can do it better” mantra. Without some flexibility in the labor component of the operating budget, nothing much will change.

  10. @Bob – That’s just operations funding. The feds also pay for a substantial portion of all capital expenses. Their is a federal law that requires operators and mechanics to have the right to collective bargaining in order to get federal funds for transit.

    For whatever it’s worth, Rahm Emmanuel has had a lot of success in Chicago by enforcing work rules in the existing contract for the Chicago Transit Authority. I speculate to some extent that such an opportunity exists in Milwaukee.

  11. Annie says:

    What type of entity is MTS? Contrary to popular usage, “non-profit” is not an entity and is non-specific.

  12. Phil Walker 598R says:

    So when was MCTS ever shy about enforcing work rules ??

  13. capper says:

    A few things to note that, unsurprisingly, Mr. Murphy left off.

    1) The other area that “efficiency” (aka profiteering) can be found is in paratransit. MV Transporation offers paratransit. Many small paratransit companies fold as MVT takes over, denying rides (a la Logisticare) and sending the profits to Texas. When do you suppose the first death will be?

    2) Grant has produced a solid paper trail of trying to alert Abele and his staff to this pending crisis. Abele responded by firing Frank Busalacchi and three of his staff. Then the ball gets dropped by Abele. To cover it up, MTS must pay!

    3) It’s very nice of Mr. Murphy to provide the salaries of Grant and his successor. But I could not find the salary of the CEO of MV Transportation to give meaning of the other salaries. Why would that be?

  14. Badger51 says:

    The references to Act 10 are misplaced. Employees of the current provider, Milwaukee Transport Services, are not public sector employees and thus, are not public sector employees subject to Act 10. As the article notes, the proposed Act 10 was modified to exclude municipal run transit systems which would have lost federal funding if the collective bargaining status was changed.
    Some news reports indicated that the new management company pledged to honor the current labor contract….can you confirm that?

  15. Roger Rabe says:

    What about the retired employees? They could be hurt most of all.
    They worked for years to earn their pension.

  16. Bruce murphy says:

    Capper, I’d be very interested in what the CEO of MV Transportation makes, but wasn’t able to find the info. If you do, please forward it and we’d be happy to publish it.

  17. @Roger – While I can’t speak to healthcare for retirees, already earned pensions should be completely safe.

  18. Michelle says:

    Milwaukee County’s paratransit system, Transit Plus needs to run its cameras at all times on these vans not just when these vans are in an accident and then they turn on. Paratransit riders and their drivers should have this feature for safety purposes just like Milwaukee County Bus Drivers have. If Milwaukee County is revamping things I believe this should be added to their “To Do List”. Safety First!

  19. Bill Sell says:

    The salaries of management is now a fixed, public cost. We know these numbers. I dare say it is not those salaries that will make or break our bus system.

    What we don’t know yet is how MV will turn a profit, and reward its shareholders. Presumably the profits will leave the region. MV is betting it can turn a profit and keep the state, county and federal subsidies. If it fails to turn a profit, the service fails. When MV leaves town, it leaves the County to re-invent the wheels.

  20. Michael Hill says:

    Your sub title is “Public bidding process awards bus contract to for-profit company.” Was public? My understanding is that Mr. Abele was the only one to see the bids. The county board was kept in the dark.

    I think it is disturbing that the proposed company is not only to a for-profit entity, but a private for profit. From Texas. I avoid alarmism, but this has “union-busting” written all over it.

    Most annoying is the fact that Mr. Abele is acting the authoritarian every bit as much as Mr. Walker. This following his refusal to support MAM bodes ill for our city.

  21. bruce murphy says:

    To Badger 51: W.C. Pihl, MV’s executive vice president for business development, told the Journal Sentinel the firm would honor existing union contracts. To Stacy, the request for proposals asked for suggestions on “cost savings opportunities, other operational efficiencies, increased ridership, revenue enhancement, etc.”

  22. Brandon says:

    Health care and salaries will be slashed for bus drivers here. If you research the salaries and benefits in Maryland for MVs drivers…you can easily see why their turnover rate for employees was over %100..and over %60 of existing drivers have one year of experience. If anyone thinks that low pay, horrible benefits, and inexperienced drivers translates into good and efficient customer service…they’re crazy. I’ve worked 10yrs as a driver and have been robbed, spit at, cursed out daily, soda thrown in my face, snowballs thrown at my head…etc, etc..all while NEVER being in one accident. I’ve watched out for lost looking kids on my bus and looked out for women and kids from the riders who look or act as if they had bad intentions for them. Low wage workers will be far less caring, and even more less to accept verbal abuse on the bus. Abele looked to the LOWEST BIDDER with no regards to a safe well run system. Milwaukee county will suffer from this transition. Please contact your local county supervisor to voice your opinion. Thank u

  23. Bill Sell says:

    I totally understand the need for improvements to bus service; after all I ride the buses, regularly.
    But MCTS is grant writing its way to improving service because Milwaukee is the one (or two) cities remaining relying on property taxes. A dedicated funding source was approved by County voters. While we wait for the politicians to get it, MCTS gets the blame.

    This is the same “blame the victim” game that goes on in education and health care.

    Milwaukee is competing against cities that not only understand the problem, but are moving ahead with a tax structure that works in an urban area.

    The plan approved by County voters would have brought to the County over $130 million annually in extra revenue from a 1 percent sales tax for parks and transit; and would have reduced property taxes a like amount. I have yet to find a better solution, especially since our sales tax is already relatively low compared to the cities we compete with for schools and jobs.

  24. Dennis says:

    The administration of MCTS by MTS has been beyond reproach. Even the very fiscal conservative Gov. Walker (former county executive) recognized the efficiency of Milwaukee Transport Services, Inc. in the management of the transit system.

    The Milwaukee County Transit System, under the management of Milwaukee Transport Services, Inc. has long been a national leader in safety, service, fares and the amount of revenue returned to on street service.

    If this essential public service becomes the entity of a “for profit” business, expect service to be cut on the lighter “feeder” routes to the main routes and in the lighter ridership areas (like Milwaukee’s far south side where many tax paying home owning city employees reside), further reducing ridership. Expect more cuts to follow that.

    With all due respect, County Executive Abele was born and raised in privilege. He isn’t the woman who had to walk 10 blocks at 11 pm to the job she had for years because her route was cut. He never had to wait one hour for a bus because “there wasn’t enough money”. He isn’t the impoverish or mentally impaired person who had to depend on a bus to get to a job or a doctor’s appointment.

    County Executive Abele has clearly made the wrong decision. Milwaukee Transport Services, Inc. is a proven entity with executives that live in the county and have a vested interest in the community.

    Why try to fix what isn’t broken?

  25. Dohnal(Wis. Conservtive Digest says:

    there is no such thing as a non profit, everyone has to make a profit or they make a loss. Lots of non profits are worse than profitable companies. I will take the profitable capitalistic companies every time.

  26. Ian Weisser says:

    It really doesn’t matter if MTS or somebody else runs the transit system. The discussion is a distraction. Ridership will continue to stagnate, regardless of operator. Suburbs will continue to approve auto-only developments, regardless of operator. Wisconsin DOT will still push hard to widen freeways, regardless of operator.

    The structure of the 1975 buyout of MTS by Milwaukee County was unique. Most cities went for a public-owned/public-operated model instead, and used the change to bring suburbs and dedicated tax revenue into the new transit district.

    Many of MCTS’s problems (lack of political support, lack of middle-class riders, geographic fragmentation, limited revenue) grew from those 1975 decisions. It’s time to revisit them.

    The County Board kept important powers and responsibilities to itself. But for 38 years it has been clueless about how to carry out it’s oversight and planning responsibilities. It has failed to lead the suburbs and city into an agreement on stable long-term funding, regional transportation planning, or to develop a vision for what the transit system should be for the community.

    It’s not just the Milwaukee County Board.
    The State Legislature has failed in their responsibility to make the various cities and counties in the region work together on their common problems.
    And the voters are responsible for failing to hold anyone accountable.

  27. Bill Sell says:

    Ian, much of what you say makes sense, but there are disconnects are not accurate. May I suggest the following:

    Your first paragraph is self-contradictory. It is not MTS that establishes regional policy. Its job under County governance is to run an efficient bus system within budget. This will be true whichever manager is chosen. MTS does not have responsibilities to steer politicians to act; in fact such political activity might be construed as self-serving.

    The structure in 1975 was a different time and place. Now cities understand the importance of regional and the need for dedicated funding; successful cities have relied on sales taxes and regional cooperation. Mayor Zeidler (1950s) understood regional and established a metropolitan regional authority, but a multitude of factors (including intransigence of the electorate, the burbs, and auto interests carried the day through the 90s and the infighting over rail). Both goals have been in the works for several years; and both have been silenced by the state government, beginning with Gov. Doyle who vetoed a dedicated funding source and tried to slam-dunk high speed rail without developing a constituency first.

    Many transit advocates have warned of the failure of transit based on local property taxes. Many politicians have whistled in the wind.

    While County government failed to foster regional thinking (and I point the finger at Supervisor Michael Mayo, chair of the Transit (TPWT) Committee who steered resolutions through the County government saying “Milwaukee first” when the sales tax was being carved up). What the County to its credit did, however, was lead the campaign for dedicated funding, the lynchpin for regional transportation. And in this they have been prescient and enormously successful beyond anyone’s expectations. The referendum supporting dedicated funding was designed to give politicians cover for an adjustment in sales and property taxes (sales replacing property taxes), but they neglected to understand it as such but only looked on it as a threat to their personal power. And ran away from it.

    The voters, well that is you and I. I take the blame for not fighting harder, explaining more, but I’d rather not point the fingers at the voters who did rise to the challenge in November 2008 and delivered was should have been a game changer.

  28. Nuclear Art says:

    Dohnal said: there is no such thing as a non profit, everyone has to make a profit or they make a loss.

    Absolute tripe. Non-profits do not pocket the extra “profit” unless they are crooked. The amount of money left in the account at the end of the year goes back in for next year or gets used to buy necessities for the future.

  29. Dohnal(Wis. Conservtive Digest says:

    Art, you are incredibly naive. Non profits are not taken out in the form of dividends but many of them take them out in the form of salaries and expenses, but they have to take in more than they give out or they will not exist..

  30. Tangelee says:

    QUESTION, I read in the above statements:
    “”Bus drivers, they are unionized under a federal law that requires any system getting federal funding to allow collective bargaining. For this reason, Act 10, the 2011 law that ended most collective bargaining rights for governmental employees in this state, made an exception for bus drivers. are not treated as county employees.
    So, Does this mean- M.V. Transportation Company is or isn’t Tax-exempt?
    Does M.V. or Is M.V. a tax-exempt organization under 501(c)(3) because they get federal funding?
    Does anyone know for sure that M.V. gets federal funding?
    And if, M.V. provides rides for passengers considered (Medicaid Rides) are they qualifying as Tax exempt (the 501(c)(3))?
    This is very important to me personally PLEASE RESPOND, Thank You

  31. Tom D says:

    Tangelee, I just noticed your question.

    My take on this is that MV is a private-sector, for-profit, company and subject to income tax. It is exempt from certain taxes (like federal fuel tax), the same as all transit and intercity bus lines.

    When a private company like MV operates a public bus system, it usually does not own the buses or garages, etc. These are owned by the government and leased to MV (or whomever). This allows the federal government to subsidize bus purchases (generally, Washington pays 80% of the cost of a new transit bus) and saves MV (or whomever) the cost of registration fees for a bus fleet.

    I served on the board of a large US bus system (outside Wisconsin) that contracted out operations to a private firm, and this is how it worked for us.

    Hope this helps.

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