The decision for the NCTD to privatize was the best solution for them. “This was not about a political issue,” says Tucker, “because so much of this decision-making process about whether you should be privatizing or not, people try to put it in to a political context and actually it’s not.
“If you operate under the premise that we exist to provide a service to customers and that really all of our resources are about providing services to customers, that gives you a business framework for you to operate.”
He says, “If you agree with that as your first premise, then you also have to balance that with the fact that in order to deliver that service, you have to have good people.” He continues, “You have to balance those two issues, that they’re not competing. “
As they went through the analysis process, Tucker says they had to be pragmatic and put everything on the table. “We started to look at if you reduce wages and benefits, can you get there? We couldn’t get there.
“We looked at various models of contracting out partially or total. When you look at the size of our bus system, partially doesn’t really get us there,” he says.
“When you look at the whole system, you’re like wow, that doesn’t solve the problem, but it’s part of a series of steps that we can take to get to a point of achieving financial stability.”
As Tucker explains, they didn’t hide anything and they weren’t shy about it. Meeting with employees more than once a month, he shared budget outlooks, he gave them spreadsheets. “I said to folks, ‘Here’s a suggestion box. If you come up with an idea better than the ideas I have, let us know about it.’
“We worked with the union; we actually negotiated an agreement with the wages and to discuss outsourcing.” He says, “You know, sometimes people get confused and they think we actually imposed. No, we negotiated with the union.”
Tucker says, “No one debated that we didn’t have a financial problem because you had the state eliminating state transit assistance that typically had been like $10.5 million to us. Some years it was a lot less, like $5 million, but there’s a certainty about zero.” He also adds that the sales tax was supposed to have been about $52 million, but they actually got $37 million.
With the deficit they were facing, they decided it was best to move forward with contracting out. They had completed all of the analysis, it was presented to the board in an open public meeting where the employees could come in and comment.
“Quite frankly there were no secrets because I had been out briefing the employees and the board gave us authorization to release an RFP and we had given them an estimate of what we thought we could save,” Tucker says.
The RFP came back and there was a contract proposal from First Transit for the first seven years of the contract. “We saved about $53 million a year,” says Tucker. And the other side of the equation he says, it allowed them to maintain current service levels.
Moving to Private Service
Tucker explains how the employees were transitioned. “For our senior employees that have been here they were able to retire from our system. The agreement that was worked out with First Transit is that senior employees got 95 percent of their pay. So that means an employee with 20 years of service is getting 95 percent of his pay from the private sector.
“I would probably argue for people that this is the best thing that could happen and use the last five to 10 years of work life to be able to accrue that kind of savings.
“For our junior employees, 19 years or less, they will take 85 percent of their wages and that was something that the union negotiated because we had developed an agreement based on an agreement that was basically 10 percent off the top for everyone.”
He says to some degree that was sort of negated by the fact they were paying 8 percent into the pension plan, so the real nominal impact was 7 percent immediately for those employees.
“We did a separation bonus for every employee of $5,000 now and for senior employees they got $8,500,” Tucker explains. “When it gets to July of next year, they get a 5 percent increase so they’re real take-home impact will be less than 2 percent.”