D65 official: Lack of competition raises school bus costs

The man who watches the money at Evanston/Skokie School District 65 says an “informal agreement” among school bus operators is driving up costs, leaving the district with “no flexibility” when it comes to saving money.

Raphael Obafemi, the district’s chief financial officer, told the Board of Education Monday night that “the cost of busing is going up astronomically” due to the shortage of drivers and the Ukraine-war-related increase in fuel prices.

But he also said there’s another reason, a “gentleman’s agreement, if you want to call it that,” among school bus companies where only one of them will bid on a school district’s contract, leaving that district no choice besides take it or leave it.

“I hate to be so blunt,” Obafemi said, “but the lease process for bus companies is a joke.”

And the punch line, he indicated, hits District 65 right in the wallet.

About 20 years ago, Obafemi said, the district paid about $2.5 million dollars a year for student bus transportation.

By the end of this school year, when the contract with bus provider Positive Connections runs out, the annual cost will be $6.3 million.

As noted, skyrocketing fuel prices are one cause.

According to the website gasprices.aaa.com, the average cost of diesel fuel (which powers school buses) in the Chicago metropolitan area is $4.98 per gallon.

One month ago, it was $3.93. One year ago, it was only $3.17.

The driver shortage is also pinching the district.

Late last year, drivers at Positive Connections threatened to quit unless they were given more money. The district ended up kicking in $125,000, and the bus company added $50,000.

But Obafemi also indicated the lack of multiple bidders makes things worse.

He stated that there are only two major companies which control school bus transportation in the United States and Canada.

It seems like there are a lot more bus companies, he noted, but said the large number of firms are subsidiaries of one large firm or the other.

Positive Connections, which has the Evanston contract, is a subsidiary of New Jersey-based Student Transportation of America.

First Student and National Express are subsidiaries of British-based firms, First Group and National Express Group, respectively.

The trade publication School Bus Fleet says that nationwide 71% of public school system buses are owned by local school districts, 28% are contractor-owned and 1% are state owned.

Obafemi said District 65 has learned the hard way about bus competition, or rather, the lack of it.

Three years ago, he said, the school system called something like 30 firms, trying to solicit bidders.

Several indicated interest, but, Obafemi noted, when it came time to open the bids, there was only one, “the same bus company we’ve been dealing with for the last ten years.”

Once, he noted, a single bid District 65 received was quite expensive, so the school system put the contract out for bid once more, hoping to find someone else.

But, Obafemi said, only the same company responded again, and this time, their bid was more costly.

That, Obafemi stated, “was kind of like the bus company teaching us a lesson. ‘You thought that [first bid] was high. We’ll send you one that’s even higher.'”

It’s a seller’s market, he told the school board. “We are at their mercy.”

Obafemi said District 65 was at least able to negotiate the last contract down from a proposed 30% increase to 15%.

He said the next contract will likely go up again.

District 65 officials have said the student reassignment process, which includes a new school in the 5th Ward, will dramatically reduce the need for busing, saving $2 million a year — money to help pay off the cost of the new school building.

But that school is not supposed to open until the 2024-25 school year, so costly busing is still a reality.

Obafemi also discussed the issue at a school board committee meeting last week, when he said “we’re dealing with a monopoly.”

He said the “informal agreement” among bus companies means “if you bid in Evanston, I won’t bid in Evanston.”

Evanston Now has contacted Student Transportation of America twice for their reaction. We have not received a response. If we get one, we will let you know what they say.