OPIEU report on costs of West Vancouver Transit

Disclaimer: This report has been produced and provided by a member of Transport 2000 BC and does not necessarily reflect Transport Action BC policy.

Why pay more?

An analysis of the West Vancouver Bus System and
the cost effectiveness of contracting out bus service.

Prepared by the
Office & Professional Employees International Union Local 378
2nd Floor, 4595 Canada Way
Burnaby, BC V5G 4L9
(604) 299-0378

Introduction

For many years, the District of West Vancouver has operated its own "Blue Bus" transportation system. While the rest of the Lower Mainland received bus service from BC Hydro, Metro Transit, and then BC Transit, West Vancouver went its own way.

The District of West Vancouver operates as a contractor for BC Transit. They provide a specific service outlined in an operating agreement. BC Transit pays for all services and collects all revenues. BC Transit also determines routes, schedules, and transit needs. West Vancouver is responsible for staffing, operating and maintaining the buses, as well as collecting all revenue and passing it on to BC Transit.

On February 28th, 1998, the Greater Vancouver Regional District ratified an agreement with the provincial government that will shift responsibility for Lower Mainland transit to the regional district. One of the reasons GVRD councillors supported this transfer of power was to be better able to create more municipal transit systems like West Vancouver's.

But is the West Vancouver model the most efficient means of delivering transit to the public? We decided to study the cost effectiveness of the West Vancouver system and see if it would be cheaper or more expensive to provide the exact same service directly through BC Transit.

Methodology

Documentary evidence has been collected to examine the financial relationship between BC Transit and the District of West Vancouver. In addition, Freedom of Information requests to West Vancouver and BC transit were put forward to gather information about West Vancouver's staffing levels, financial statements, and tax status. Finally, the collective agreements between West Vancouver and its transit employees (represented by the Amalgamated Transit Union local 134) and BC Transit and its employees (represented by the Independent Canadian Transit Union and the Office and Professional Employees International Union) were compared to determine the difference in staffing costs.

In accumulating the data, we found that some information was available for one year only, and other financial figures varied over a period of years. For that reason, for the purpose of this study, we will look at the information from the years 1994-1997. Where we were able to gather four year's worth of data, we used it all. Where we had only one year's data, we multiplied it by four. The findings do not represent an exact calculation of what savings/losses were incurred as a result of West Vancouver's unique relationship with BC Transit, merely an educated guess based on the information provided by BC Transit and the District of West Vancouver.

Findings

1) Payment to contractor

Like any contractor, West Vancouver is paid for its services. Over the last four years, BC Transit has paid $20,727,941 to West Vancouver for them to operate the buses. Over that time, West Vancouver Transit spent $20,418,897. The difference, $309,044 was put in the general coffers of the municipality.

Presumably, BC Transit could have provided the public with the exact same service and saved $309,044.

2) GST Status

According to information given to us from BC Transit, revenue Canada considers West Vancouver to be a contractor providing services to BC Transit. As a result, BC Transit must pay GST on its payment to the municipality. Because of its tax status as a municipal transit system, BC Transit only pays 3% GST. Nonetheless, that works out to $621,838.30 over the course of this study.

3) Labour Costs

The primary reason most companies choose to contract out services is to achieve some measure of cost savings, usually in labour costs. West Vancouver Transit is no exception. By comparing collective agreements, it is possible to measure, by close approximation, the amount saved in labour costs.

Drivers with West Vancouver receive a lower hourly rate, however that is compensated with an extra three weeks holidays plus an extra yearly payment of 10 hours wages over their BC Transit equivalent. BC Transit drivers receive higher overtime wages, particularly for operators working on Sundays. Both companies offer similar benefits packages. While West Vancouver Transit does maintain 7.7 full time equivalent administrative staff, we were unable to determine the nature of their work and thus could not compare their wages with BC Transit.

Through a freedom of information request, we learned that West Vancouver hires a full time equivalent of 53 drivers per year and 10.2 maintenance staff. Using those figures, as well as figures for the amount of overtime paid during the 1997 year, we calculated the savings to BC Transit of using a contractor rather than in house staff.

For the period 1994-1997

Over the four year period of the study, West Vancouver has been able to shave $190,704 off the BC Transit labour costs.

4 ) Property Taxes

BC Transit has a bus depot in North Vancouver. From that depot, bus service to the District of West Vancouver could easily be accommodated without any extra land costs or building expansion. Any buildings used for the West Vancouver service could be utilized for other purposes or sold. We do not have access to any information on the value of the land used by West Vancouver, except that BC Transit has told us they paid $117,379 in 1997/98 property taxes under their agreement with the District. Over the four years of this study, that would come to $469,516.

5) Other Costs (no monetary value attached)

Spare drivers

BC Transit operates a large and complex system of keeping spare drivers and maintenance staff "spareboard" available to fill in for employees that are on sick leave, union business, other types of leave and unforeseen circumstances. West Vancouver does the same on a smaller scale.

Spareboard operators are paid for a full days work, weather they operate a bus or not. So if West Vancouver has spare operators on standby, they must be paid.

West Vancouver spareboard requirements could easily be handled by drivers in the North Vancouver depot with little or no increase in staff. At the very least, the spareboard drivers employed by the West Vancouver system would stand a better chance of being used to drive buses under a larger operation (the entire North Shore) than they presently do. This would no doubt save the transit system money.

We were unable to acquire exact figures here as spareboard rules and formula are extremely complex and in any event we were unable to get sufficient data from either BC Transit or West Vancouver.

Uniforms & Corporate Image

West Vancouver Transit is responsible for its own corporate image and for providing uniforms for its drivers. This requires extra expense for corporate image development and excludes the possibility of mass purchasing of similar uniforms with BC Transit to achieve cost savings.

Again, it is impossible for us to attach an estimated dollar figure to these expenses as we were unable to acquire sufficient information from the companies.

Summary

The following savings (losses) can be attributed to the contracted arrangement between BC Transit and the District of West Vancouver. The figures represent our educated guesses as to the difference in costs that occur in the status quo versus BC Transit treating service in West Vancouver in a similar manner to the rest of the province.

Savings (loss) to BC Transit
of Contract with West Vancouver
For the years 1994-1997

Profit to contractor (West Vancouver) ($309,044.00)

GST on Contract ($621,838.30)

Difference in salary costs $190,704.00

Property Tax on West Vancouver Depot ($469,516.00)

Total ($1,209,694.30)

Average savings (loss) per year ($302,423.58)

Conclusion

BC Transit would be wise to let its contract with the District of West Vancouver lapse and handle West Vancouver transit service in-house, from the North Vancouver Depot. The annual savings of approximately $300,000 could be used towards operating more buses, infrastructure, or towards paying down part of the BC Transit debt.

Compared to a BC Transit operating budget of over $600 million, savings of $300,000 per year may seem small. But were those savings plowed back into transportation in West Vancouver, it would result in 3,563 more service hours offered per year. This would represent a 4.5% increase in West Vancouver service hours offered to the public.

There are lessons here for the GVRD, which has advocated for more West Vancouver-type systems. Imposing the West Vancouver model on larger cities will mean even larger expenses.

Without factoring in the effect of separate systems on service, a purely financial analysis seems to indicate that contracting of bus service does not reduce expenses.