Funding redux

Modified version of Chicagoist comment.

I realize that I’m shouting to the breeze, but man, most of you folks don’t know much about how we pay for transit. Some common themes, and answers:

What? Why do we already pay too much for awful service?

Your fares pay about half the cost of running CTA service. Taxpayers (local sales tax) cover the rest. And the fact is, the cost of operations is increasing three times faster than tax revenue. When your cost of living goes up while your salary stays flat, you gotta make cuts.

Yeah, the trains and buses and slow, unreliable, and dirty. You know why? Because every year that we’ve played this budget crisis game, CTA has ended up spending money allocated for cleaning/repairs on daily operations instead. Basic maintenance has been put off for years, and it’s starting to show, big time.

The trains elsewhere are great, and they make money!

No mass transit agency in the world makes sufficient profit on operations to cover the cost of capital improvements. Those glorious transit systems elsewhere rely on generous tax subsidies: the Parisian transit authority gets FIVE TIMES more in tax subsidies than its equivalent here. Pick up the papers in NYC, LA, SF, DC, Boston, Philly, Pittsburgh, Toronto, Cleveland, Columbus, Atlanta, wherever: those transit agencies are also running out of money. Perhaps not as fast as ours, but nonetheless. (Philly’s SEPTA, in fact, is about to vote on what they also call “the doomsday budget,” unless the state bails them out. However, their governor and mayor have made saving transit their #1 priority, unlike here, where Blago and Richie lust after a vast new welfare state and a literally-colossal construction boondoggle.)

Let’s look at the one fully “privatized” passenger transportation industry in the USA: commercial airlines. Anyone who thinks that the airlines provide exquisite service at reasonable prices, please raise your hands. I thought not. And yet even this marvel of private-sector efficiency can’t turn a profit: in its first century, the airline industry earned $18 billion in profits — when it wasn’t chalking up $32 billion in losses. Airlines are so consistently awash in red ink that no less than Warren Buffett rued, “if I’d been at Kitty Hawk in 1903 when Orville Wright took off, I would have been farsighted enough, and public-spirited enough — I’d owe this to future capitalists — to shoot him down.”

Privatize! Fire the bums! Sell more ads!

We tried private operations of the CTA. Didn’t work; all those companies went bankrupt way back in 1947, which is how we got the CTA in the first place. Oh, and CTA can’t just pull a United Airlines and kill its pensions and benefits; that’s illegal. As for waste and graft, we the taxpayers already paid for a a giant audit of CTA, RTA, Metra, and Pace, courtesy of the state Auditor General. Finding: “the needs are real, the problems are real.” By almost any standard, our transit agencies are managing money pretty well. Yes, pensions in particular need a great big fix, but they’re so underfunded that one can hardly blame them for bankrupting CTA. Oh, and shuttering CTA headquarters tomorrow* wouldn’t even come close to filling this budget hole.

(In fact, I was recently in S.F., where a local newspaper ran a graph showing Chicago’s administrative overhead costs as far lower than LA’s or SF’s — and comparable to NYC, which theoretically would benefit from vast economies of scale.)

* Annual occupancy costs at the new HQ are lower than they were in the rented Mart space; the building was built with federal capital funds — see below — and CTA, as a state-chartered public agency, doesn’t pay property taxes on buildings it owns but does in rented space.

Advertising is not a major revenue source for transit agencies. Even auctioning off naming rights wouldn’t do much; a failed deal to rename a prime downtown station in Boston yielded just $160K a year. At that price, even renaming every Loop station would cover just 2% of CTA’s budget gap.

The Feds/Olympics will make everything better. Why all the fancy new construction?

Yes, the Feds pay half of construction (“capital”) costs for (a few) big new shiny things like Brown Line reconstruction, but they don’t pay anything for daily operations or maintenance. This is kind of like Mom paying for new clothes once Junior’s outgrown them, but refusing to pay to wash or mend the ones Jr. already has. No wonder he’s wearing flashy new shoes over hole-y socks.

You think the Feds will bail us out in 2016? Fat chance. Again, they only pay part of the construction costs; Salt Lake City, Vancouver, and other Olympic cities still had to hike local taxes big time to fund transit operations and construction. Oh, and CTA kind of needs money now, not in nine years — remember, the whole system grinds to a halt in October if no action is taken.

Cut off-peak service, don’t raise rush hour fares!

Bus and train drivers, like most of us, work full-time, eight-hour shifts. Hiring people just for rush hour is nearly impossible — would you work a split shift, 6 AM to 7 PM, without getting paid for 10 AM to 4 PM? Since the drivers are already paid to be there during rush hour, no additional drivers need to be hired for off-peak service. So, off-peak service is cheaper for CTA to provide. (Incidentally, day pass riders ride more off-peak, hence the day pass discount.)

That’s it! I’m gonna get a car!

Yeah, you and a hundred thousand other people, too. You think traffic’s bad, and parking and gas expensive? Just you wait.

Whine, whine, whine, whine, whine. Whine. (Repeat ad nauseam.)

Shut up and do something already. Visit, read up, and take action. (Note: I am not materially affiliated with that site or with any transit agency.)

10 thoughts on “Funding redux

  1. Another reply, this time to a whiny RedEye blog post about how CTA should’ve sent helicopters and SWAT teams to rescue stranded riders on Saturday night. The comments are more of the same, although there appears to be a little more recognition of the need for political change (see comment from “KA”), and more calls of privatization (sigh). Odd that even in Daley’s Chicago, part of Bush’s America, people still have faith that private operators are somehow less corrupt than public operations. (Besides, as Mark F. points out, the CTA is capable of running the Orange Line perfectly well.) There’s also a helpful suggestion to write to the USOC, who’s about the only outside voice of reason Daley will listen to.

    CTA just barely manages to do its job of moving Chicagoans because we the taxpayers — or perhaps I should say we the voters — don’t give it the resources it needs. Someone mentioned Parisian transit: Chicago and Paris have similar populations, but their regional transit system gets FIVE TIMES more in taxpayer subsidies: over $3 billion more every year. Of course their trains are more frequent and their stations are cleaner.

    I agree that the system is a disgrace, especially to a city widely proclaimed as “green.” However, sometimes you really do get what you pay for, or what you vote for. We shouldn’t just demand a better CTA, we should demand a better city.
    Posted by: payton | Jul 9, 2007 2:34:32 AM

  2. It’s apparently letter-writing day here at West North. This was adapted from the Metropolis 2020 form letter.

    To: Governor Rod Blagojevich (217-524-4049; 312-814-6183)
    Sen. Emil Jones, Jr. (217-782-3242)
    Sen. Rickey Hendon (773-265-8617)
    Sen. Frank Watson (217-782-7818)
    Rep. Michael Madigan (217-524-1794)
    Rep. Annazette Collins (217-557-7643)
    Rep. Tom Cross (217-782-3234)
    Mayor Richard M. Daley (312-744-2324)
    Regional Transportation Authority

    To the above duly elected and appointed officials:

    I am shocked, alarmed, dismayed, and disgusted that my elected representatives in the Illinois state — and Chicago city — government are fiddling while transit service in the Chicago region literally crumbles to dust. Without immediate action, a transportation system upon which millions of Illinoisans (disproportionately those with lower incomes) rely upon every single day will grind to a halt in a matter of weeks; this impending disaster will have untold and permanent consequences for Illinois’s economy. I can think of no clearer danger to the region’s — and thus Illinois’s — economy, quality of life, and environment, and I implore you to take action posthaste.

    As a fellow public official, I fully understand that public services do not come free of charge, and that Illinois citizens are often skeptical of government’s ability to property manage and deliver public services. An eminently sensible plan to re-form, re-structure, and re-finance the Regional Transit Authority has been advanced by Chicago Metropolis 2020. It gives the Regional Transportation Authority clear responsibility to run and oversee the region’s transit; provides adequate long-term revenue sources for operating expenses and crucial capital investments necessary to ensure the region’s long-term economic health and quality of life; and adjust the governing structure of the RTA and its three service boards to broaden accountability.

    Many of these issues have been addressed by SB 572, sponsored by Rep. Julie Hamos. This bill will allow the Chicago region alone to act to address not just today’s operating funding emergency, but also a long backlog of capital needs that are resulting in rapidly deteriorating transit service throughout the region, and in Chicago in particular. The patient is in critical condition, and requires swift intervention to prevent further damage to the region’s economy and global competitiveness.

    Indeed, while our state dilly-dallies on the issue, other areas are aggressively running full speed ahead with dynamic proposals to improve their transportation networks. In the past few months, I have had the mixed blessing of traveling in spotless new trains over smooth tracks in cities across North America, from Washington and New York to Dallas and Denver to Vancouver and Los Angeles — all standing in abrupt, disheartening contrast to the contemptible service provided by the Chicago Transit Authority. These cities have found that new and improved transit service generates billions of dollars in new investment, as well as incalculable benefits to regional quality of life. In fact, one 2005 study by the Fiscal Policy Institute found that public spending on mass transit generates far more economic activity than any other public spending by the state of New York. Without an infusion of new investment, the inextricably linked economies of Chicago and Illinois will stagnate and decline as those of other cities race ahead.

    I am respectfully — but urgently — asking for your support to sustain Illinois’ economy, environment, and quality of life through this thoughtful plan to restore our mass transit network to a state of good repair. You hold the fate of Illinois in your hands. Please act today to save mass transit in northeastern Illinois.

    Respectfully yours,

    Payton Chung

  3. It’s not just me: “Slow zones on the O’Hare branch of the Blue Line are among the worst in the CTA system, and ridership on that branch has fallen more than 4 percent this year as more riders abandon the line because of poor service.” (Hilkevitch in the Trib, 11 July). Despite the choice of some stupid weekends to close service — okay, so you’ve missed the downtown festivals, but Pitchfork is a few blocks west of downtown — and the continued lack of an action plan to fix the Kennedy Expy portion, I’d still have to say that I’m glad to see some work done on the line.

  4. Another update: privatized operations and “renewals” (reconstruction) on the London Underground are failing — one of the contractors has filed for bankruptcy — and will require a huge taxpayer bailout. [Channel4]

  5. Pingback: ragging on privatization « west north

  6. yet another blog response. let’s see if it gets posted to RedEye | CTA blog.

    I support higher rush hour fares, but the question is unfairly loaded. For some myopic reason, the Trib likes to play CTA as the bogeyman when they’re just the messenger: the state of Illinois has not lived up to its half of the bargain. We riders were to pay half (well, 53%) of the cost of CTA, and taxes would provide the other half. Well, state?

    Just to set the record straight:
    1. Metra is cleaner because the taxpayer subsidy for each trip they provide within Chicago is 52% higher than what CTA gets for the same trip. If CTA had that kind of money, they could provide wonderful service, as well.
    2. Systemwide Bus Tracker was just announced three months ago. Deploying a real-time IT system covering 3,136 buses on 154 discrete routes doesn’t exactly happen overnight.
    3. Trips on NYC Transit seem faster because things in Manhattan are closer together. UWS to LES practically spans the breadth of gentrified Manhattan, for a total distance of five miles — the same distance as Lakeview to the South Loop. That same trip on the Red Line takes less time than taking the V-A-2-1 from Delancey to 79/B’way. When making NYC-Chicago comparisons, use Brooklyn, not Manhattan, as your control — the population densities are far more comparable. Ever try crosstown service in Bklyn? Far worse than Chicago.
    4. Yes, maintenance has been lacking in recent years. That’s because for the past few years, CTA has raided maintenance money in order to keep the trains running. After all, they have to pay for gas and health insurance and all that, too, and cleaning and maintenance are easy to cut now — you don’t see the results until later. Well, guys, today is yesterday’s later, and we’re seeing those results.
    5. However, since a certain Northwest Sider hasn’t been riding, you probably haven’t noticed that construction is underway to fix slow zones on the Blue Line.
    6. Please, folks, take a broader view of the situation. When more people ride transit or ride bikes, everyone benefits. More service is added — remember when the Brown Line didn’t run downtown on weekends? More bike lanes appear, and drivers begin to pay more attention to bikes. (Yes, studies show exactly that.) The air gets cleaner. Flowers bloom and children play. On the other hand, when more people drive, we all pay. Increased traffic ties up you, other drivers, and buses. Parking rates go up, and restrictions increase. More pollution makes my lungs burn, Lake Michigan smell funny, and New Orleans drown. It’s in everyone’s best interest to get more people to ride transit, which is why all of you need to make a simple phone call to Springfield to tell them that transit is good for you, good for Chicago, and good for Illinois.

  7. another RedEye response.

    Jennifer, are you aware that Ron Huberman received an MBA from Chicago in 2000? Or that transit in Chicago never turned an operating profit? It ran losses even in the pre-automobile years, and not only under CTA but under private owners who ran the streetcars and “L” trains as loss leaders (to hawk electricity, land, or phony stocks).

    Only in Hong Kong and Japan do mass transit systems earn money on operations — both are so crowded that the Gold Coast looks spacious by comparison, and even they receive huge government subsidies for construction costs. By contrast, their highways receive no subsidy, so a drive across town can easily cost $50.

    Fares pay less than half of the cost of running CTA, and that’s actually more efficient than most other transit agencies. CTA has a dedicated tax revenue stream (city sales taxes) but this is a much narrower moat than what comparable systems elsewhere get. (Boston and the Twin Cities draw taxes from their entire states, for instance.)

    Transit deserves government subsidies because it enables the highly efficient wealth-creating, tax-paying economic entity we call “Chicago,” and particularly downtown. Without Chicago, I think we can all agree that Illinois is just Iowa with a beach. Now, why is that so hard for our elected representatives to understand?

    Meanwhile, the blasé among you might reconsider your nonchalance. Metra plans big service cuts in January, and once the CTA cuts take effect, tens of thousands of additional cars will result in infuriating gridlock and even higher prices for gas and parking. Even us hardy year-round bicyclists will have to fight fiercer traffic and worse air pollution.

    About the poll, the right answer is None of the Above. Our political leaders have punted and we riders are left to pick up the pieces.

  8. yet another.

    Chicago and transit have had an unhealthily codependent relationship since birth. Even when the system was privately owned and even before there WERE cars, the lines rarely made operating profits. (The profits came from securities fraud.) Today, every single transit system in America requires public subsidies — 95% of them require more than CTA (per unit of service), in fact.

    It just so happens that we live in the United States, where states have sovereignty. CTA, and the city, for that matter, are mere creatures of Illinois. They can’t save CTA on their own; they need their creator, the state of Illinois, to give them the power to do so. Indeed, that’s all we’re asking for: for RTA and Chicago to be given the authority to raise the necessary revenue.

    Three-fourths of downtown executives say that transit service is the reason why their business is downtown. Downtown Chicago will choke on traffic, wither, and die without transit, since that’s how over half the people get there now. And then what? If I wanted to sit in traffic and work in the suburbs, I’d move back to LA, where there’s sunshine, not tornadoes and blizzards.

    I sent another angry letter tonight to my reps, G-Rod, and the Four Tops.

  9. A back-of-the-napkin illustration of the rush hour cash flow problem.

    Rush hour service is actually the MOST expensive — and thus money-losing — to provide. Let’s say you run a transit agency with one, 24-hour bus route. Off-peak (base) demand requires 10 buses, but rush hours (four hours, or 17% of a day) require 20 buses. That means that 50% of your rolling stock is used only 17% of the time, which isn’t very efficient. (The CTA actually provides about 70% more peak service than off-peak, so double isn’t far off. The “doomsday” cuts, by removing most rush hour routes, would bring this to around 30%.)

    As with any other transit agency, most of the CTA’s costs are for labor, though. Base/off-peak demand requires that you hire 40 drivers, 30 full-time (three eight-hour shifts for 10 buses, five weekdays) and 10 part-time (each covering eight hours Sat + Sun). But how do you staff rush hours? I sure wouldn’t want to work 7-9 AM, go home, and come back to work 4-6 PM, while only getting paid half time! — or even 6-10 AM + 3-7 PM for full time. And since your drivers are unionized, they sure won’t stand for it. So, to run just 10 additional buses at rush hour, you need to hire *20* additional full-time drivers: 10 to drive morning rush and 10 to drive evening rush, bringing your FTE total to 50. Now, 40% of your full-time workforce is there just to deal with those 17% of the hours. You see how this is getting expensive?

    Now, imagine that you get 30 additional riders. If those riders board at lunch hour, you’re fine — you’ve got excess capacity. If necessary, you can pull a bus out of the garage. But if those additional riders board at rush hour, that’s a problem: all 20 of your buses are in use. The marginal cost of those passengers is highest at rush hour, since they require additional capacity.

    Pretty much the same thing has been happening to CTA at the same time, as the employment base shifted from three-shift industrial (with workplaces all over the city) to one-shift office (with most people working downtown or, worse yet, in the transit-starved suburbs). Even downtown, the number of manufacturing, wholesaling, and utilities jobs (~200,000) nearly equaled services and financial jobs (~230,000, not including retail) in 1972. But by 2000, service/financial jobs vastly outnumbered industrial jobs, 400,000 to 75,000.

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