Competitive Contracting of Bus Services: A Better Deal for Riders and Taxpayers

This study examines the New York City bus transit system and analyzes the potential cost savings of applying a competitive-contracting approach to bus service, using the model of various major American and European cities. The study finds that:

• In addition to dedicated taxes and toll revenues, New York's bus operations consume at least an additional $345 million in state and city operating subsidies.
• The use of competitive contracting in major transit systems in the U.S. and Europe has produced reductions in operating costs ranging from 20-51%, with savings in excess of 35% being the norm.
• Replicating even the least impressive of those results, a 20% cost reduction, would save New York's bus transit system the $340 million - enough to nearly eliminate the city and state operating subsidies.
• Competitive contracting can work in a high-wage environment like New York City. For example, bus routes put up for competitive bidding by the New Jersey Transit Authority have expenses 35% lower than the routes the Authority operates itself.
• New York's transit costs are exceptionally high. Depending on whether the figures are adjusted for higher regional labor costs, New York's publicly operated bus routes have the either the 5th or 6th highest operating expenses among the 30 largest American bus transit systems. New York's private bus franchisees, selected without any bidding process, have either the 7th or 12th highest expenses.

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