The COVID-19 pandemic continues to impose drastic changes on pupil transportation as school districts prepare to reopen, most likely in the fall. Meanwhile, many school bus contractors are still struggling to maintain their businesses — keeping employees on the payroll and buses maintained, up to speed on inspections and ready to roll when school resumes — with reduced or no payments from districts.
In School Bus Fleet’s recent webinar, “Getting Paid, Staying Afloat: How Contractors Can Cope With the COVID Shutdown,” three experts — Michelle Wiltgen, the assistant vice president and national commercial marketing manager for National Interstate Insurance Co.; Corey Muirhead, the president of the New York School Bus Contractors Association and executive vice president of Logan Bus and Affiliates in Ozone Park, N.Y.; and Curt Macysyn, the executive director of the National School Transportation Association (NSTA) — advised contractors on how to keep their businesses going.
The presenters discussed insurance and liability issues sparked by the pandemic; safety guidelines; how to counter-arguments that some school districts are using as a basis for not paying contractors and negotiate; and the latest information on federal loan programs. Here, SBF shares some takeaways from that webinar.
1. Educate Customers, Stakeholders.
School bus contractors perform several services besides supplying buses and drivers. Despite school closures, Muirhead says, these services are still being provided, including driver physicals and medical exam reports, CPR and first aid certification, and bus inspections. Companies that include these ancillary benefits, as well as administrative costs in their bid prices provide the services whether or not transportation is running.
However, school district administrators and school boards may not be aware of these myriad measures and need to be informed. As to how to do this, he advises, contact school board officials, members of the community, and the PTA, and don’t forget to post on social media.
2. Form Pay Refusal Counterarguments.
Some contractors may also need specific counterarguments to a couple common reasons districts give to refuse pay if buses aren’t running while schools are closed.
In New York, Muirhead says, those arguments have been that there is no service being performed to pay for and that payment would be a gift of public funds.
Muirhead says that legal research shows that municipal expenditures used for a public transportation system have long been recognized as a legitimate public purpose not conflicting with the state constitution, according to a judge’s ruling in a New York state court case known as the County of Niagara vs Leavitt (New York.)
Preserving the transportation infrastructure of a school district by paying a school bus contractor to continue to maintain its fleet and trained, legally compliant drivers is essential for the public good, he adds.
“There’s case law to support our arguments,” Muirhead says. “You are still providing services.”
Contractors should also, when told that a district will not pay for services based on advice from their legal counsel, remind them that the school board and superintendent run the district, not their attorneys.
“School boards and community members are going to have to live with not having transportation when school resumes,” Muirhead says. “It will take months to have vehicles inspected and approved to resume service.”
3. Negotiate, Negotiate, Negotiate.
Case in point: districts that once refused to pay contractors while buses aren’t running but who are then educated on all the services they are getting are changing their positions.
“In New York they have been willing to pay up to 90% and percentages as low as 50%,” Muirhead notes.
Districts are offering to pay a percentage of the contract revenue for true fixed costs such as keeping employees on the payroll, covering their health insurance, and vehicle inspections.
“Run your numbers and find out what percentage of your contract revenue you can live with,” he adds.
Muirhead suggests going over what the district normally pays every year and offering, for example, to continue to operate by laying off employees but paying health insurance, and for inspections and maintenance, essentially saying “This is what I can do if you were to pay me X amount.”
NSTA's Macysyn adds that school budgets have already been allocated, especially for transportation, so it is not about money not being in the coffer.
“It’s a matter of striking that reasonable position: a district is going to pay the contractor because they understand the importance of maintaining the continuity of the transportation system,” he says.
4. Maintain Relationships.
National Interstate’s Wiltgen says that keeping in touch with employees who are furloughed as well as customers and business partners — including your insurer — is more important than ever.
“They want to know what you’re doing; they are part of your family,” she adds. “Let them know your protocols for keeping passengers and students safe.”
5. Follow Safety Guidelines Consistently.
Wiltgen stresses following the Centers for Disease Control and Prevention (CDC) guidelines for protecting passengers from the Coronavirus. (Those were updated on May 19, about one week after this webinar was presented, to include recommendations for social distancing on school buses and cleaning school buses.) She also advises following any additional practices the same way, every time, in every situation.
6. Lawyer Up.
Wiltgen warns contractors to be prepared, unfortunately, to be sued and to proactively seek legal counsel. Resources include The U.S. Law Network. Additionally, associations such as the American Bus Association often make legal resources available to members.
“Your policies and procedures are going to be key to protecting you,” she says.
7. Be Thorough, Empathetic With Claims.
Wiltgen points out that employees who test positive for COVID-19 are seeking damages through workers’ compensation. However, they must prove they contracted Coronavirus at work, which can be an uphill battle.
Collect as much information as possible and contact your insurance company and broker, she recommends. Also, show empathy toward employees.
“Obviously there is a real fear factor,” Wiltgen adds.
8. Keep Up to Speed on Loan Eligibility.
Macysyn says that the CARES Act provided many contractors that met the criteria of having 500 or fewer employees with loans through the Paycheck Protection Program (PPP). However, many others are above that threshold, which disqualifies them.
An alternative is The Main Street Lending Program, established by the Federal Reserve to support small- and medium-sized businesses that were in solid financial condition before the pandemic.
Macysyn adds that businesses receiving a PPP loan are also eligible to receive a Main Street Lending Program loan. The program is intended for companies with no more than 15,000 employees or annual revenue of no more than $5 billion.
Other CARES Act provisions that can help contractors, Macysyn says, are Net Operating Losses, Business Interest Expense, the Employee Retention Credit, and Payroll Tax Deferral. However, PPP loan recipients are not eligible for the employee retention credit, he notes.
9. Seek Cleaning Advice From OEMs.
Wiltgen recommends reaching out to manufacturers to ensure that the products you are using on your buses are compliant because various surfaces in the vehicles may require different care.
10. Cover Pandemics in Contracts.
Muirhead says that to get much-needed protection moving forward, cover pandemics in contracts with language clarifying you will be paid during a school shutdown, and add it in the Q & A section of your website.
Listen to the webinar on-demand.