Taken for a Ride: Hawaii’s Runaway School Bus Costs
Editor’s note: This is the first in a series on Hawaii’s runaway school bus costs. Read other articles on the topic published today.
In 2009, Hawaii taxpayers paid Roberts Hawaii $200 a day to operate a bus route serving Kohala Elementary and High schools on the Big Island.
Roberts had held the contract for a few years, after it won the bid by undercutting two other bus companies.
But when that contract expired, no other bus company stepped up to compete, and the Hawaii Department of Education agreed to pay Roberts’ new asking price. This time it was $584 鈥 a 190 percent increase 鈥 to do the same job.
That’s just one of the many egregious examples of huge increases in school bus payments by the education department unearthed by a Civil Beat investigation.
Civil Beat analyzed hundreds of bid documents spanning 11 years and found that competition among school bus contractors came to an abrupt halt in 2008.
In fact, while educators and lawmakers have been bemoaning the cost increases and questioning whether lack of competition was the cause, in the last four years, not a single regular school bus route in Hawaii has drawn competitive bids. Over that same period, the department hasn’t rejected a single bid, as is its right, to try to get a better price for taxpayers.
As a result, Hawaii is spending $1,850 per student on school bus transportation this year 鈥 more than twice the in 2008, the most recent year reported. In 2008, Hawaii averaged about $1,200 per student.
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- In 2007, the last year there were competitive bids, more than half of the 116 routes up for grabs had more than one company vying for them. The competitive bids averaged $49,000 per year, while the average non-competitive bids were slightly higher, at $53,000.
But all of that changed the very next year.
- In 2008, when all 12 bus contractors mysteriously stopped bidding against each other, the average price of the more than 136 routes up for bid skyrocketed to $86,000 per year 鈥 an overnight increase of nearly 70 percent.
- In 2010 and 2011 so few routes were up for bid that it’s difficult to make a valid comparison. In 2010, the average price for the three routes bid was $111,000. The average for the 18 in 2011 was $64,000.
At least one bus company owner told Civil Beat that she’s been interviewed by investigators looking into possible price gouging. State Attorney General officials won’t confirm or deny that an investigation is underway.
The major bus companies refused repeated attempts to speak with them about the issue. But the chair of the House Committee on Finance didn’t mince words about Civil Beat’s findings.
“The lack of any competition doesn’t pass the smell test,” Rep. Marcus Oshiro said. “We’ve known for a while that something’s not right here, but you can’t quite put your finger on it.”
Simple Equation: Less Competition = More Costs
By the department’s own figures, the state’s school bus costs have been on a runaway path since 2005. This year they are more than double that year’s , at about , while the number of riders has remained flat, around 44,000. Routes haven’t changed much either.
| Fiscal Year | Total Allocation |
|---|---|
| 2006 | $34,407,893 |
| 2007 | $41,333,930 |
| 2008 | $46,509,227 |
| 2009 | $63,228,239 |
| 2010 | $72,662,146 |
| 2011 | $69,053,484 |
| 2012 | $71,929,193 |
“Obviously we’ve been aware for a very long time,” said Randy Moore, assistant superintendent of school facilities and support services. “We and the (Board of Education) have known since they began increasing, that prices have been growing well beyond what we can explain with wage, CPI and fuel cost increases.”
This series examines in detail only the non-special ed portion of the transportation budget, because of the complexity of the contracts to serve students with special needs. Forty-three percent of the transportation budget is spent on special ed students, even though they make up just 10 percent of the riders.
The rising bus prices have hit students and parents hard. The fare for a single ride has mushroomed from 35 cents one-way in 2009 to $1.25 one-way this year. For students using a pass to ride the bus, the fare increased from $60 per quarter to $72 per quarter and from $225 per year to $270 per year. For a family with three students on the bus, that’s $810 per year.
Classrooms have suffered, too, as the Hawaii Department of Education has, since 2006, taken more than $37 million from federal aid to meet its chronic transportation deficit 鈥 money that could have been spent to cushion salary cuts or preserve special education positions that were eliminated in the wake of budget cuts. In 2009, the department also requested another $12 million in emergency appropriations from the Legislature.
And while school officials and lawmakers have been talking about the problem for years, not much has been done to curb the costs, or to pinpoint how they got out of control in the first place.
Now, a few key lawmakers say they have had enough.
The Legislature has threatened to zero out the school transportation budget next year unless the Department of Education and its contractors produce some solutions for reducing costs.
“This is the first year we’ve really forced the issue,” said Sen. Jill Tokuda, who chairs the Senate Education Committee. “The lack of competition definitely contributes to the potential for the prices to go up more than they should, and these kinds of annual increases are just not sustainable for us.”
The state allows contractors to extend their contracts up to four years once the initial six-year term expires.
Civil Beat found that while competition dwindled, contractors also began opting out of those extensions. Instead of taking advantage of a sure thing, they began terminating their agreements after only six years. Between 2006 and 2011, 82 of the 98 contracts that came up for rebid were the result of contracts that did not get extended, according to a report from Moore to the education board.
By not extending their contracts 鈥 even though they contain cost escalators for fuel, wages and cost of living 鈥 companies seized the opportunity to rebid for them at higher rates.
Contractors don’t need to worry that someone else will come along and bid against them. No one ever does 鈥 at least not since 2008, Civil Beat found.
School Bus Service is ‘Imperative’
A dozen bus companies take 40,000 non-special ed children to and from public schools all over the state, 180 days per year. They decide how much to charge based on things like vehicle costs, fuel prices, insurance premiums and length of routes.1
Together, these 12 companies cover more than 500 routes divided into about 100 contracts of varying sizes, most of which last for six years, with two optional two-year extensions for a maximum contract life of 10 years.
All contracts include annual price adjustments to compensate for inflation and wage and fuel increases.
The 12 have formed the Hawaii School Bus Association, a membership organization that takes dues and keeps contractors informed about issues affecting them.
Roberts Hawaii is by far the biggest of the companies that provides school bus service. Civil Beat’s analysis shows that of the 840 routes the Hawaii Department of Education solicited bids for over the last 12 years, Roberts won more than 50 percent. The next-biggest contractor, Gomes School Bus Service, won only 11 percent of the routes put out for bid.
By law, the Department of Education is not even required to provide school bus transportation. It contracts out for it as an additional service, to help get students to the classroom. Students qualify to ride the bus if they live 1.5 miles or more from their neighborhood school, with one exception. Those on free and reduced-cost meal plans (about half of the riders) get to ride free, and all others pay a fare that covers only a fraction of the actual transportation costs. Students at about 50 schools in the Honolulu area do not get school bus service, because they have the option to ride the city bus.
At Kohala Elementary School on the Big island, where Roberts Hawaii two years ago tripled its prices overnight, nearly half the 396 students ride the bus. “With the distances that students must come to school, transportation is critical,” said principal Danny Garcia.
He said that a few years ago the state threatened to end school bus service.
“And that was alarming 鈥 that’s a crisis,” Garcia said. “It’s imperative that every school has student transportation.”
In any given year, about 15 school bus contracts run their course and come up for bid again. The Department of Education puts together information about the requirements for each of the contracts to begin the following year, and sometime in the spring its procurement office issues an invitation for bids.
The invitation is publicly available online and is also sent directly to any companies that have expressed interest in school bus contracts 鈥 sometimes even to those that haven’t, according to department officials. The invitation remains open at least 10 days, typically as long as three weeks, according to the procurement office, and states clearly the deadline for submitting written bids.
The bidder who meets all the requirements and offers the lowest price gets the contract, but with one caveat: During the bid review process, the superintendent of the Department of Education has the option to bids it considers unreasonable or bids that exceed its available funds.
Civil Beat made numerous requests for an interview with Superintendent Kathryn Matayoshi, but received no response. Deputy Superintendent Ronn Nozoe said that the assistant superintendent for facilities and school services, Randy Moore, would speak for the department on the issue.
In the last 12 years, according to Civil Beat’s analysis, the department has rejected five regular school bus contract bids 鈥 all of them before 2005. In 2005, it negotiated 14, or almost all, of the winning bids, saving taxpayers more than $500,000 per year on those contracts. It has not negotiated a bid on a regular education route since then, even though officials are well aware that bids are climbing.
The department and school board have done little to put the brakes on bus company price increases and have sought solutions that come at the expense of kids, parents and taxpayers. In May 2008, Moore with the Board of Education. But instead of focusing on holding down increases in what the bus companies were charging, he proposed saving money by cutting the level of service.
Moore offered up the idea of increasing the distance students have to live from school in order to ride the bus, in an attempt to help curb costs. The board did eventually increase the distance, from 1 mile to 1.5 miles, for students in sixth grade or higher.
In 2009, the board suggested of school bus transportation, in an effort to get the department “out of the business.” But that never happened, because board members felt strongly that as a single statewide school district, the Hawaii Department of Education should provide school bus services.
School officials say they have had trouble figuring out what’s going on. Inflation and rising fuel prices have contributed to the growing costs for taking students to and from school, but department officials say those cannot fully account for overnight increases of 200 percent, or even 20 percent.
Operating costs might rise by between 4 percent and 8 percent per year, said James Kauhi, manager of the school system’s transportation services branch, but annual adjustments for them are already built into the contracts.
The only explanation seems to lie in the dearth of competition, which means companies can submit a bid without worrying that they’ll be undercut by a lower bidder. This effectively forces the district to take the bid, or leave it and risk not having bus service to some schools.
“The strategy has been, there’s not much we can do,” said Moore. “But we can publicize the results.”
Moore said 鈥減ublicize鈥 doesn鈥檛 mean press releases. Instead, he said, district officials took the information to the board, which up until this year was elected. They asked the board for guidance.
‘Questionable’ Bidding Finally Gets Some Attention
School bus contractors haven’t always been so deferential to one another.
Just 10 years ago, more than 75 percent of regular education bus routes put out for bid received competing offers, according to Civil Beat’s analysis.
That鈥檚 a far cry from what’s been happening the last few years, and it caught the attention of education officials.
“As we looked into the rising costs of buses, it became clear that the bidding was questionable,” said Breene Harimoto, a Board of Education member from 2002 to 2010, who frequently about school transportation costs during his eight-year tenure on the board. “It appeared there was only one bidder for each route. That raised a lot of red flags in my mind.”
Harimoto said he was so disturbed by the situation that for years he asked legislators to stop funding the program until the bus contractors justified the rising costs to the board’s satisfaction.
But the board, the district and the Legislature have continued to pay the contractors’ prices and only now are beginning to try to force the issue.
Lawmakers were dismayed earlier this year when the department asked for an especially flagrant funding increase for transportation: $19.6 million 鈥 a 39 percent increase over the $49 million DOE had received from the the Legislature the previous year.
“It forced us to really hit the brakes hard and say, ‘This has got to stop,'” Tokuda said. “In a year when we were looking at double-digit million dollar decreases to the department’s budget, we took every increase very seriously. When you come in and see an emergency request for $19 million extra for transportation, you know that’s $19 million you would sure like to see in the classroom supporting our schools.”
So lawmakers for school buses in the 2012-2013 school year. It’s an effort to force the department to come up with a convincing plan for getting the costs under control, and legislators can reinstate it when they go back into session in January.
“That’s a very serious move that we’ve never done before, but it’s also a very strong signal that we cannot continue business as usual and this is not sustainable,” said Tokuda.
Oshiro, the House finance chair, notes there’s still time to put the money back in the budget. “But not without having the (Department of Education) come back with this report and provide a public explanation.”
Bus Companies Reluctant to Talk
Civil Beat called each of the 12 bus contractors numerous times for this story. Most did not respond.
But Lindy Akita, owner of Akita Enterprises on Kauai, did. He said he stopped expanding, and therefore competing for other companies’ routes, because he is happy with the size of his business.
“For me, I have enough business now,” he said. “And as long as I can provide a good workplace for all of my employees and be fair with them in all I do, that’s my way of continuing.”
He added that he wants to pay off his debts for new buses, driver training and insurance.
“I don’t want to spend any more money,” he said. “I want to get out of debt right now and be cleared.”
But Civil Beat’s analysis shows that Akita, too, is taking advantage of the current lack of competition.
In 2008, Akita Enterprises terminated a three-route contract on the Big Island and rebid for it 鈥 uncontested 鈥 garnering overnight increases of 77 percent, 88 percent and 99 percent. He said he doesn’t worry about competitors.
Akita, who is treasurer of the Hawaii School Bus Association, says there’s no agreement among contractors not to compete. But he did recently tell other members at a meeting that he plans to extend his contracts in the future rather than rebid for them.
“In one of our meetings, I brought it up to the whole membership that I felt, because of the economy, we should watch how we bid and lower our costs now,” he said.
The biggest contractor, Roberts Hawaii declined to be interviewed by Civil Beat. A brief statement sent through company spokeswoman, Carolyn Tanaka, said:
| “Robert’s Hawaii School Bus Inc. (“Robert’s”)2 as a school bus contractor considers a broad range of market factors when bidding for Department of Education contracts. Robert鈥檚 is working cooperatively with the Board of Education and Department of Education officials to address the state鈥檚 funding challenges and efforts to reduce student transportation service expenditures. Robert’s continues our longstanding commitment to providing quality and efficient services to Hawaii’s communities.” |
Moana Dudoit, CEO of Dudoit Bus Service on Molokai, said she always extends her contracts because it’s security for her. She’s afraid of competition the next time her contracts are up for bid. The mom-and-pop companies on the small island fear their competitors, she said 鈥 especially the big conglomerates from the other islands.
“We’re so afraid, because we’re small companies, and big companies like Roberts or the Gomes can jump onto our island and just take it away,” she said. “I bid so low because I’m scared that other companies will go lower than I will and I won’t get it.”
“Bid opening day is the second scariest day of my life,” Dudoit said. “The first is death, and that’s the second scariest. I get so nervous that my blood pressure rises. When you get the bid, you just thank God that you got it.”
That doesn’t mean, though, that she is stuck making the same amount that she bid in 2005 for another 10 years.
Civil Beat’s analysis shows she bid an average of $260 per day back then on each of the routes in her eight-bus contract. Because of the department’s annual adjustments for inflation, six years later she now makes $322 per route. That’s an increase of 24 percent over the last six years 鈥 considerably less than the sky-high rates that companies that rebid their contracts without competition are now getting.
Criminal Investigation in the Works?
Under pressure from the Legislature, in recent weeks officials in the Department of Education have been reaching out to the bus companies in a scramble to lower costs.
In August, Tokuda and other lawmakers held a private meeting with the department and some bus contractors. The goal was to make sure school district officials and contractors were working together to come up with a strategy for reining in costs. The strategy is supposed to be included in a December report to the Legislature.
And there may be one more force at work to try to get costs back in line 鈥 a criminal investigation. The sudden drying up of competition in what had been a highly competitive business raises questions.
At least one bus contractor, Dudoit, says she received a visit earlier this year from investigators looking into possible price gouging among contractors.
The Attorney General’s office said it will not confirm or deny any ongoing investigations. When Civil Beat asked if there is a completed investigation of school bus contractors, Deputy Attorney General Rod Kimura, head of the anti-trust division, said, “No.”
Tokuda said that a lot of agencies have different roles in unraveling the mysteries of school bus contracts. Her main concern, though, is ensuring that taxpayer dollars are spent wisely.
“To date, I think the answers that we’ve received and even the (Board of Education) receives have not really been sufficient to answer the real questions,” she said. “Not that bus transportation isn’t important, but we have to be realistic. The time has come for long-term, serious, sustainable answers.
“It is not the goal of the Legislature to kill school bus service, but it’s our goal to do it better.”
- Michael Levine assisted with data analysis for this report.
1. Hawaii Department of Education school bus contractors:
- , Maui
- , Kauai
- Randolph Castro, Maui
- Dudoit’s Bus Service, Molokai
- Gomes School Bus Service, Ltd., Oahu
- Ground Transport, Inc., Oahu
- Molokai Transportation Associates, Inc., Molokai
- Okumura Bus Service, Maui
- Spencer’s Bus Service, Molokai
- Tomasa’s Bus Co., Oahu
- Yamaguchi Bus Service, Inc., Kauai
鈫
2. Although the company spokeswoman used an apostrophe in Roberts Hawaii’s name (e.g. “Robert’s Hawaii”), Civil Beat opted to use the punctuation consistent with the company’s website text and bus logos: “Roberts Hawaii.”
