Seems like few Einstein’s work as location managers, GM’s, Regional VP’s or C-suite executives at Stupid Transportation of America. That said, the employee that designed their contract process with school districts is an absolute genius.
How so? STA typically signs 5 year deals with school districts. They then purchase new school buses from one of the major bus manufacturers on a 5-year lease-to-buy agreement. Whether STA leases directly from the manufacture or through a leasing company isn’t important. The important point is that STA owns its buses outright after 5 years.
Now consider what options school districts have in the last year of the original 5 year contract. They can:
- Put out a new Request For Proposal; or,
- Ask the bus contractor to extend the original contract for another 5 years.
School districts typically prefer the first option because it avoids the RFP process and keeps the same terms of the original contract.
School bus contractors you’d think would prefer that option also because then they could then increase the price they charge for services to better reflect the current market. However, STA doesn’t do that, which is so ingenious on their part. Why? Because STA now owns the buses free and clear. They even get to depreciate the buses for another 4 years, which means paying lower taxes.
So why is this important for drivers to know? Because when you complain to management about only getting a 25 cent raise in the first year of the extended contract, STA is going to tell you that they don’t have the money to give you any more. They’ll pull out the new contract and show you there wasn’t any increase in what they charge the school district except for the inflation rider. In other words, they’ll claim poverty. Except we know that’s not true because STA isn’t paying lease payments on their buses anymore.
Let’s look at the numbers for one school bus and see what that means for STA and drivers:
- Cost: $125,000
- Lease payments: $30,000 per year for 5 years (at 6% interest)
- Use per year: 1,000 hours
Years 6 – 10: savings of $33,000. In other words, extra profit to STA is as much as $33 per hour.
Conclusion: STA is a raking in an extra $33 in profit for every hour you’re driving one of their buses over the next 5 years. And how much was that raise they gave you? 25 cent? 50 cents if you’re really lucky.