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New company gets $83 million contract to operate bus system

Updated Thursday, May 19, 2011 | 5:33 p.m.

The Regional Transportation Commission today approved a controversial contract to give control of its bus system to a new company.

The board voted 4-3 to approve a contract with First Transit to operate the RTC’s fixed-route bus system. The contract shifts control of the system from one of the largest transportation companies in the world.

The contract, which will go into effect in September, is for three years, but can be extended twice for two years each.

The exact value of the contract will fluctuate as bus routes and the RTC budget change from year to year. In the next fiscal year budget, which was also approved by the board, First Transit will get $86.4 million; however, $2.8 million is for start-up costs, so the contract will likely be worth about $83 million per year, or more than $500 million if First Transit maintains the contract for all seven years.

The RTC owns the Las Vegas Valley’s public bus system, but maintenance and operation of buses are contracted to a private company. The system is the largest in the country operated by one company.

Until now, the RTC’s contractor has been Veolia Transportation, a multinational company based in Paris.

Operation of the RTC’s paratransit system has been contracted to First Transit, part of a company based in the United Kingdom that also operates the McCarran International Airport shuttle buses and owns the Greyhound Lines bus company.

The new contract gives First Transit control of all RTC buses, at least until the paratransit contract comes up for renewal this year. Members of the RTC board, which includes elected officials from Clark County and each municipality, were divided in the decision.

County Commissioners Larry Brown and Chris Giunchigliani, and Las Vegas Councilman Steve Ross voted against the contract with First Transit. Henderson Councilwoman Debra March, Boulder City Mayor Roger Tobler, North Las Vegas Councilman Robert Eliason and Mesquite Councilman David Bennett voted for the contract. Las Vegas Councilwoman Lois Tarkanian, who recently joined the RTC board, wasn’t at the meeting.

The normally tame and short RTC meeting turned into a five-hour affair after dozens of Veolia employees joined, packing the County Commission chambers beyond capacity.

The contract was the subject of months of intense lobbying involving some of the county’s most high-powered politicians, attorneys and consultants. First Transit’s bid for the contract was significantly lower than Veolia’s, although the exact difference depended on who interpreted the numbers. First Transit claimed that Veolia’s bid was $50 million higher, with $10 million of that being straight profit that would go to the company.

But Jeremy Aguero, an analyst for Applied Analysis who was hired by the RTC to give an impartial interpretation of the two proposals, said the difference between the contracts in terms of overhead and profit was closer to $4.2 million.

Veolia officials said that because they operate the system, they know the correct cost of doing business here and that First Transit was lowballing its bid.

But First Transit said it plans to use innovative techniques to lower costs.

The disparity between the bids seemed to be what concerned board members most, suggesting that the lower one may be unreliable, they said.

Ross said he wasn’t comfortable with either proposal because of the difference. He advocated abandoning both proposals and starting over.

Tobler disagreed, saying the board has always trusted RTC staff recommendations, and the independent analysis verified that First Transit’s bid was lower and yet still reasonable, he said.

“We do have confidence in the staff and we have their recommendation,” Tobler said.

If for some reason First Transit is unable to provide service at the level the contract requires and funds, the company will have to absorb the loss, so there is no risk for the RTC, he said.

Brown, the board’s chairman, suggested that the board split up the current bus system into contracts with multiple operators, as is done in other cities.

But RTC General Manager Jacob Snow said it would take at least a year for the staff to figure that out. In the meantime, they would have to negotiate an extension to the current contract with Veolia, which would be more expensive than going with First Transit for three years, while the RTC prepares to split the system when the contract comes up.

The concept was still supported by Giunchigliani and Ross, but overruled by the other members who said it was their duty to protect taxpayer money and go with the lower bid.

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