Streetsblog Capitol Hill

Virginia Railway Express (VRE), the commuter network that links northwest Virginia to Washington D.C., today refused a challenge by Amtrak to its decision to switch operating providers to the U.S. arm of Keolis, a private French transit company.

Although Amtrak based its challenge on Keolis' inexperience operating American rail lines, the latter company maintains a sizable transit presence as a subsidiary of SNCF, the French national high-speed railway.

Moreover, Keolis submitted a notably lower bid to take over VRE operations, undercutting Amtrak by $500,000 on first-year transition costs and $300,000 in annual operating costs. The French-owned company's winning bid totaled $85 million for five years, offering VRE workers the option of shifting to another Amtrak line or staying on under the new management.

Looking beyond the local implications of VRE's switch to Keolis, the new contract is part of a larger trend toward transit privatization that has seen recent deals struck in New Orleans, Savannah, and Phoenix. The Obama administration is encouraging greater use of public-private partnerships to help fund and operate transport networks, making these agreements something of a portent.

But substantial hurdles remain to the effective participation of private companies in the business of transit. Independent auditors at the Government Accountability Office submitted a report [PDF] to Congress last week after taking a yearlong look at how the federal transit funding process affects the ability of local officials to join forces with the private sector.

And what the GAO found was a whole lot of hurdles, many of them unique to the cumbersome rules of Washington's New Starts transit program. From the report (emphasis mine):

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The Wall Street Journal reports today on the growing number of cities around the country that are in talks to outsource local transit systems to cope with the budgetary pressures of the recession.

New Orleans plans to outsource nearly every aspect of its mass-transit system to a French company, an approach that could appeal to other cash-strapped American cities looking to cut spending without eliminating bus or rail services.

Under terms of a deal struck earlier this month, the New Orleans Regional Transit Authority will pay a subsidiary of Veolia Environnement about $56.3 million each year, and potentially $600 million over the next decade, to finance, manage and operate the city's bus and streetcar lines.

The deal could eventually save Norta -- which spends about $72 million a year to run its system -- as much as 30%, said Chairman Cesar Burgos.

Transit outsourcing is a notion that sounds reasonable enough, particularly given Congress' reluctance to let large cities use federal money on operating costs. But the Journal omitted a notable detail about Veolia, the French company that's poised to run transit networks in New Orleans and Savannah, Georgia: It is battling Los Angeles' Metrolink commuter rail in court over a September crash that killed 25 people.

That crash occurred when Robert Sanchez, a Metrolink engineer hired by Veolia, ran a red light and hit a Union Pacific freight train. Sanchez was later revealed to be sending text messages 22 seconds before impact, and federal investigators found that he invited a local teen to try driving his train.

Veolia strongly defended its safety record following the Metrolink crash, though L.A. has since scaled back its use of private transit contractors amid local reports that listed the company's past missteps.

Veolia's website notes that its deals are not "privatization" -- a word that carries a somewhat loaded political subtext -- but "outsourcing," which does not entitle a private firm to "the acquisition of all of the public company's assets."

But no matter what term is used, letting contractors bid to manage local transit raises the question of whether safety and service trade-offs are inevitable as the firms work to maximize their profit potential.

The rest of the Journal's article on transit outsourcing is viewable in full after the jump.

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