Wednesday, February 28, 2007

House Mass Transit Committee: Questions for the Service Boards

Representatives from the service boards (CTA, Metra and Pace) are being served up to the Illinois House Mass Transit Committee this Friday. The subject of the hearing is "service standards and reporting by the transit agencies," which seems a somewhat limited topic given the funding and other challenges that face the service boards. Here are some questions the Committee might want to ask them along the way:

-- The current operating funding challenge facing the RTA and the service boards is often characterized as a funding crisis. But with equal justification the situation can be viewed as a crisis of overproduction, with the service boards providing more transit service than can be supported by the operating funding stream established by the General Assembly in 1983, namely, the RTA sales tax and accompanying State match. If your service board had to match its level of service to the currently available operating funding stream, what would your system look like?

-- Labor costs account for most of your operating costs. What legislative measures would help you to increase labor productivity and keep labor cost increases to a minimum?

-- Other than paratransit service and Metra service on some rail lines, the service boards do not engage in significant subcontracting of their transit operations. Do you face any obstacles to subcontracting and, if so, what legislative measures would help you to take advantage of subcontracting opportunities where subcontracting makes economic and operational sense?

-- All the service boards face significant uncovered operating deficits in 2007. The RTA is supposed to ensure that the service board budgets are balanced, but apparently it has failed in its financial oversight function. What recommendations do you have for improving the RTA's financial oversight function?

-- The Chairman of this Committee has recently introduced a bill that vests the RTA with expanded powers. Do you support this bill? Please explain.

-- The RTA Act designates the RTA as the primary public body in the region to obtain federal and state funding for the region's public transit system. Isn't it true, however, that each service board has taken the lead in applying for such grants? Do you believe that it would be more efficient for the RTA to take the lead in obtaining capital funds for transit? Please explain.

-- The Final Report of the RTA's Moving Beyond Congestion planning effort lists many ways to raise money for operating funds, but makes no recommendations. How do you recommend that the General Assembly close the operating funding gap?

-- Do you believe that the RTA's sale tax rate differential should be changed? Please explain why and how.

-- Do you believe that the statutory formula for distributing the RTA sales tax revenue should change? Please explain why and how.

-- The Final Report recommends that over 80 percent of the capital funds devoted to enhancing and expanding the region's public transit system be spent on Metra and Pace projects. Do you agree that this is an appropriate allocation of capital?

-- What do you believe is the most cost-effective way of increasing transit ridership in the region?

-- Recently, paratransit service responsibilities were consolidated in Pace. Are there other reconfigurations of service responsibilities that would be cost-effective and improve service?

Tuesday, February 27, 2007

Time for an Emergency Oversight Agency?

Yesterday's Chicago Tribune editorial argues that the RTA needs to be radically revamped in order to be effective. As the last post demonstrated, Representative Hamos' new bill will not accomplish that task. It is limited in scope and does little more than repackage the powers that the RTA already has under the RTA Act but has chosen not to fully exercise.

Overview of Emergency Oversight Agencies

When public agencies (1) have been financially mismanaged, (2) are faced with serious operational problems, and (3) have lost the public's confidence in their ability to fulfill their responsibilities, emergency oversight agencies are sometimes created and vested with extraordinary powers to set things right. These oversight agencies often take drastic and politically unpopular measures and then hand back authority to the agency once financial and operational conditions have stabilized.

Three examples come to mind--(a) the Municipal Assistance Corporation, the New York City financial oversight and funding agency chaired by Felix Rohytan in the mid-1970s when NYC was facing bankruptcy and, closer to home, (b) the Illinois School District Financial Oversight Panels, which step in when school districts get into serious financial trouble. and (c) the Chicago School Board takeovers of a poorly performing school from the local school council responsible for that school pursuant to section 34-8.3 of the School Code (105 ILCS 5/34‑8.3).

These oversight bodies typically work as follows. They are situated as a conduit through which the troubled agency can tap into new money. They are also empowered, usually statutorily but also as a practical matter through negotiation of bond covenants and operating funding agreements, to force the troubled agency to make improvements to its systems and operations as a condition of receiving this new money.

Oversight agencies are given review and veto power over budgets, major personnel decisions, new capital investments, and the like. By having both the carrot of new money plus the stick that comes with such oversight powers, the oversight agency can often break the political deadlocks and dysfunctional institutional cultures that stand in the way of necessary changes.

Regional Transit Problems Qualify For Such Oversight

As the Tribune editorial and others of its kind (here and here) indicate, the three conditions for an oversight agency are present with respect to the region's public transit system.

First, the RTA and service boards are in a financial crisis, as they face large and growing operating deficits and a shortage of capital that is severely compromising the CTA system.

The RTA has largely escaped responsibility for this financial crisis, when it should shoulder much of the blame for at least the looming operating deficits. Financial crises don't come out of nowhere. For the past several years the RTA has allowed the service boards--especially CTA and Pace--to spend beyond their means in order to maintain their service levels. The RTA has done so even though the RTA Act gives it the power to reject service board operating budgets (and capital plans) that are financially imprudent.

It may be admirable for the service boards to try to live beyond their financial means in order to provide the public with the most public transit possible. It clearly is not the RTA's role as a financial oversight agency, however, to enable such behavior.

The RTA Act provides a dedicated funding source--the RTA sales tax--for public transit in the region and sets forth certain financial performance measures such as balanced budgets and farebox recovery ratios that the RTA is supposed to use to enforce an appropriate level of financial discipline. The General Assembly, in other words, tasked the RTA with the responsibility for making sure that the level of transit service provided by the service boards matches the available financial resources

The RTA's 2007 budget, with its large uncovered operating deficits, illustrates the RTA's failure to provide effective financial oversight. The RTA has failed as surely as school boards in a variety of Illinois school districts have failed to manage their districts' finances and become subject to Illinois school district financial oversight panels.

Second, the RTA and the service boards are faced with serious operational problems. These include the plague of slow zones on the CTA rail lines, the burgeoning costs of providing ADA paratransit, labor cost and work rule challenges, failing pension systems, and the like. The upcoming Auditor General's report will detail these problems.

Third, as indicated by the editorials cited above, there is a crisis of confidence in the ability of the RTA and the service boards to work themselves out the mess they've created (and to be fair found themselves in as a result of the State's failure to provide adequate capital funding).

The regional consensus appears to be that providing more funds will not fix problems that stem from the RTA's leadership failures, the continued rivalries between the collar counties and the City of Chicago, the poor coordination of service, the unseemly competition for federal grants, the lack of rigorous standards for screening proposed new capital investments, and the like.

Introducing NIPTOA

A Northeastern Illinois Public Transit Oversight Authority ("NIPTOA") created along the lines of other oversight agencies might look like this:

-- NIPTOA would have a small board comprised of members picked by the Governor and senior legislative leaders.
-- The NIPTOA board would be empowered to exercise all of the current financial oversight powers of the RTA plus any additional oversight powers vested in it by the General Assembly. The RTA would continue its other functions only to the extent deemed necessary by the NIPTOA.
-- NIPTOA would be able to tap into additional State funds set aside for transit operations, but only upon the NIPTOA's certification that the service boards have made substantial progress toward certain statutorily mandated goals (e.g., fiscal soundness; fare medium compatibility; elimination of duplicative services and personnel).
-- NIPTOA would be able to tap into additional State funds set aside for capital improvements based on similar certifications
-- NIPTOA would have the power to increase and/or equalize the RTA sales tax rates up to certain levels, but only for a limited period.
-- NIPTOA would be charged with recommending to the General Assembly changes in the (a) organizational structure of the transit delivery and oversight systems and (b) funding mechanisms for the regional transit system. NIPTOA's power to increase and/or equalize the RTA sale would end at the earlier of such legislative action or a date certain.
-- NIPTOA would have the power to issue debt using the same cash flow heretofore available to the RTA and would have to approve any debt issues by the CTA (Metra and Pace lack the statutory power to issue debt).
-- NIPTOA would have to approve any applications for federal or state grants.
-- NIPTOA would have to approve any service board collective bargaining agreements and would be prohibited by statute from approving any agreement that prohibited the service board from subcontracting work to third parties.
-- NIPTOA would be empowered to order changes in the fares and/or service levels of a service board if doing so was necessary to preserve the good financial condition of the service board and only after the service board failed to act.
-- NIPTOA would have the power to reject any contract over a certain amount.

This list is illustrative. Final legislation would, of course, have to be very carefully drafted.


The RTA's Moving Beyond Congestion effort's plea for more funding without any fundamental changes in the way the region organizes, funds and operates its public transit service has been decisively rejected. The current financial crisis has exposed the RTA's failure as an effective financial oversight agency. The conditions have been met for empowering an emergency oversight agency to spend the next few years making hard, sometimes unpopular, but still necessary changes to the region's public transit system.

Saturday, February 24, 2007

Analysis of Rep. Hamos' RTA Powers Bill

The previous post summarized Representative Hamos' bill amending certain provisions of the RTA Act. This post will focus on a few key sections of that bill. Unfortunately, while well-intentioned, the bill is surprisingly limited in scope and permissive in language. It is unlikely to shift the balance of power from the service boards to the RTA when it comes to key issues that make a difference in how transit works for the average customer and the region.

It is important to understand the limited scope of Representative Hamos' bill. The bill does not address: (1) the plea for massive increases in operating and capital funding that the RTA and the service boards have made as part of the Moving Beyond Congestion effort; (2) the rate differential in the RTA sale tax between Cook County (1 percent) and the collar counties (0.25 percent); (3) the statutory allocation of sales tax revenue among the three service boards depending on the region from which the tax was collected; (4) the structure of the RTA board; or (5) the wisdom of having three separately chartered service boards provide transit service in the region.

It is rather odd that the bill has a 10 year sunset provision. If the goals promoted by the bill, such as better coordination among the service boards, are important, and if the means to reach those goals, such as various expanded RTA powers, are so necessary, then why have them last for only ten years?

Another odd feature of the bill is that it vests the RTA with the authority to exercise new powers but does not require the RTA to exercise those powers. Thus, the various grants of authority to the RTA in section 2.01a(b)(1) - (8) are drafted such that the RTA "may" exercise the new powers. Query why Representative Hamos did not provide that the RTA "shall" exercise these powers if she thought that these powers are necessary in order to achieve the stated goals of her bill in improving the region's transit system.

Let's now look at key features of the bill.

Fares and Transfer Charges

The bill (2.01a(b)(3)) states that the RTA "may require one or more of the service boards to change its fare and transfer charges, terms, conditions, or policies established by those Service Boards in order to promote the coordination of services and service interconnections, to prevent unnecessary duplication of services, and to promote transfers among transit services."

Some media reports have suggested that the bill will give the RTA expansive powers change fares. To the contrary, the bill appears to contemplate RTA intervention into fare setting only when necessary "to promote the coordination of services and service interconnectins and to prevent unnecessary duplication of services, and to promote transfers." This probably involves a narrow subset of fare-setting decisions. Thus, the difficult task of raising base fares remains with the service boards and the RTA can escape the heat.

As a practical matter, the RTA currently has the power to insist on changes in fares and transfer charges. It can do so by conditioning its approval of the service board capital plans and/or operating budgets on service board compliance with RTA policies on things like coordination of service and promotion of transfers. Likewise, the RTA could condition its allocation of discretionary capital and operating funds to the service boards on compliance with RTA polices.

There is a real question whether it is in the cultural DNA of the RTA to exercise this "new" power when it has failed to exercise its existing powers.

Scrutiny of Capital Plans

The bill (2.01a(b)(5)) gives the RTA the power to require evidence that proposed projects for the planning and development of transit stations or station improvements support "maximum transit use by promoting transfers among transit services or supports transit-oriented land development intended to generate ridership increases."

Note that this type of review is limited to "stations and station improvements." It is puzzling why this requirement to demonstrate transit-oriented development, ridership increases, etc. before approving capital investments is not extended to other forms of transit investment such as new bus and rail lines.

A bold and innovative RTA might seize upon this language to require that local communities have transit-oriented development policies in place before the RTA will approve funding for stations and station improvements in those communities. The RTA also might rigorously allocate capital dollars based on expected levels of trip generation.

In light of the RTA's 25-year history of non-confrontation with local communities about their land-use policies and its obvious willingness to put capital dollars into low return-on-investment projects, how likely is it that the RTA will read this tepid statutory language as a mandate to condition to investment in stations on aggressively holding local communities to transit-oriented development policies and holding itself to allocating capital money based on appropriate criteria such as expected trip generation?

After all, the current RTA Act (2.01(b)) empowers the RTA as follows:

The Authority shall subject the operating and capital plans and expenditures of the Service Boards in the metropolitan region with regard to public transportation to continuing review so that the Authority may budget and expend its funds with maximum effectiveness and efficiency.

This existing grant of authority certainly seems sufficient for the RTA to condition its approval of the operating and capital plans of the service boards on service board performance in areas like maximizing transfers between types of service, generating ridership, and the other goals set forth in the Hamos legislation. RTA's failure to exercise effective leadership in these areas is not for lack of existing statutory authority.

Alternatives Analyses

The bill (2.01a(b)(7)) provides that for new transit lines or line extensions the RTA may conduct "the analysis of all available alternatives and options, in conformance with regional plans, objectives, and performance standards, in order to identify the alternatives that should be considered for more formal assessments."

Some commentators have read this language as giving the RTA to take the lead in the process for obtaining federal grants for transit projects. They state that "the RTA, and not the boards, could conduct the needs-assessment studies required under federal law for any proposed new service expansion, such as the CTA’s Circle Line or Metra’s STAR Line."

However, the bill is not nearly so sweeping. The RTA "may" conduct such analyses, just as today it presumably can study proposed capital projects and conduct alternatives analyses to its heart's content. Nowhere does the bill preclude the service boards from doing such studies or submitting them to the federal government in support of their applications for federal funding.

We've been down this road before. The current RTA Act (section 4.02(b)) states that:

The Authority shall be the primary public body in the metropolitan region with authority to apply for and receive any grants, loans or other funds relating to public transportation programs from the State of Illinois or any department or agency thereof, or from the federal government or any department or agency thereof.

As the "primary public body" to apply for capital grants from the state and federal governments, the RTA long ago could have taken the position that it was the public body responsible for conducting alternative analyses and the like and that it is is the final arbiter of which transit projects in the region should get funded and in which order. Instead, the RTA has ceded these powers, which has created the very problems that Representative Hamos hopes to correct with tepid new statutory language.

Again, why should we assume the RTA will exercise powers that it appears to have ceded already?

Regional Transit Innovations Fund

One surprise in the bill was the Regional Transit Innovations Fund, which the RTA is to use to fund "projects or investments that further the purposes of this Section."

The RTIF is funded by "up to 15% of any State-authorized or appropriated capital or operating funds" received by the RTA that are (1) not authorized or earmarked by the state or the federal government for a specific purpose and (2) are in addition to any State, federal, or tax revenues available to the Authority as of the effective date of the bill.

One question is whether "in addition to" available State, federal and tax revenue means literally any money that comes in on top of what the RTA now has on hand, or refers only to new streams of income that the General Assembly might provide.

As a practical matter, how likely is it that the RTA in its current configuration will take it on itself to "hold back" funds for RTIF projects when doing so will fare increases and/or service cuts by the service boards. Methinks the RTA will shy away from being put in that trick box and, at least in its current configuration, is unlikely to do much with the RTIF idea other than fund some limited and politically easy projects--more scrolling signs in train stations anyone?

After all, and I know that this sounds like a broken record, the RTA already has 15% of the RTA sales tax revenue for its discretionary use on transit operations and projects. The vast majority of this money is now pumped into the CTA. But nothing in the RTA Act stopped the RTA years ago from using this money to fund capital projects that advanced the RTA's goals.

Indeed, the RTA currently spends about $7.5 million annually to fund projects that seem perfect candidates for RTIF funding. (Here at pg. 12 of 50). These projects include the universal fare care and development of transit hubs. Why should we expect that the permissive new statutory language will prompt the RTA to fundamentally change its approach to capital investments?

We may examine the planning aspects of Representative Hamos' bill in another post. Suffice it to say that calling for more coordination among planners guarantees more meetings. Whether the Chicago Metropolitian Agency for Planning can do something more rigorous that its log-rolling predecessors when it comes to scrutinizing transportation projects remains to be seen.


Unfortunately, Representative Hamos' bill is unlikely to prompt much improvement in the way transit is rolled out to the public in northeastern Illinois. The permissive language in the bill for the most part only restates the RTA's existing powers. Based on the RTA's history there is little reason to believe that the RTA and the service boards will view the bill as a mandate for the kind of fundamental changes that from her public statements Representative Hamos appears to believe are necessary.

Overview of Rep. Hamos' RTA Act Bill

Representative Julie Hamos introduced a bill yesterday to revamp the RTA. The bill got some press coverage (here and here), but it has not yet been posted on the General Assembly's website. Here is a summary of the bill.

The bill amends section 1.02 of the RTA Act to provide that the powers and duties of the RTA "must be enhanced with respect to overall planning and coordination, the provision of an integrated regional transit system, improved customer service and efficiency, and improved systemwide performance."

The heart of the bill is a new section 2.01a of the RTA Act. Subsection (a) provides that the RTA "shall be responsible for the planning and coordination of an integrated regional transit system, by establishing regional goals, objectives, and performance standards for the Service Boards and all other public transportation services funded the the [RTA]." Subsection (a) goes on to list the measures for which the RTA shall develop such goals, objectives and performance standards:

(1) ridership increases, using 2006 boardings as the benchmark;
(2) coordinated fare and transfer policies, "including development of a universal fare instrument." (i.e., find the regional transit Holy Grail);
(3) "coordinated services and service interconnections to prevent duplication of service and promote transfers among transit services";
(4) capital and operating improvements intended to enhance ridership or customer service that can be implemented within a five-year period, including service enhancements for off-peak and reverse commute riders, new customer service technology, etc.;
(5) location and design of transit infrastructure that promotes transfer among transit services and transit oriented development; and
(6) "consolidated sales, marketing, and public information programs to promote all transit services within the region."

Subsection 2.01a(b) gives the RTA the following additional powers:

(1) & (2): Power to get ridership and financial information from the service boards "in whatever form, detail, intervals, or timetables deemed necessary by the Authority's Executive Director;"
(3) The RTA may require service boards to change their "fare and transfer charges, terms, conditions, or policies established by those Service Boards in order to promote the coordination of services and service interconnections, to prevent unnecessary duplication of services, and to promote transfers among transit services;"
(4) The RTA may intervene in and arbitrate disputes between the service boards over "services, routes or schedules and the "decision of the Authority shall be final;"
(5) The RTA "may, before approving projects for the planning and development of stations or station improvements for inclusion in the 5-Year Program, require a determination that the proposed project supports maximum transit use by promoting transfers among transit services or supports transit-oriented land development intended to generate ridership increases;"
(6) The RTA can conduct management, performance, compliance and financial audits of the service boards;
(7) The RTA "may conduct, for new transit lines or line extension, the analysis of all available alternatives and options, in conformance with regional plans, objectives, and performance standards, in order to identify the alternatives that should be considered for more formal assessments" and
(8) The RTA may create a "Regional Transit Innovations Fund," to invest in projects that further the goals of this bill.

Subsection 2.01a(c) requires the RTA to file an annual report on its progress in implementing its "regional goals, objectives and performance standards." Subsection 2.01a(d) is a sunset provision that repeals section 2.01a after 10 years.

The remainder of the bill amends sections 2.12, 4.13, and 5.01 of the RTA Act to provide for tighter integration between the RTA and the Chicago Metropolitan Agency for Planning (CMAP). Most notably, the RTA is to use CMAP's forecasts and plans as the basis for the RTA's capital plan and CMAP is to review and certify that the RTA annual capital plan "is consistent with regional plans and priorities."

An upcoming post will discuss a few key provisions of the bill in more detail.

Friday, February 23, 2007

Holland Performance Audit Preview

Just hours before the Tribune posted this exclusive article on Bill Holland's upcoming performance audit of the RTA and the service boards (CTA, Metra and Pace) I posted that we shouldn't expect too much from that audit. My concern was that the audit might not address larger issues such as transit funding formulas and governance or cast a critical eye on the RTA's proposed Moving Beyond Congestion Plan ($400 million in new operating subsidies and $2 billion in new capital subsidies each year over the next five years). Looks like I was at least partially wrong.

The article, authored by Jon Hilkevitch and Richard Wronski, is based on what appears to be exclusive access to a draft of the audit. According to the article the audit will conclude that "oversight of mass transit in the Chicago region is deeply flawed, hobbled by weak leadership, competition instead of cooperation between the transit agencies, wasteful duplication of services and skewed priorities." No argument with that conclusion.

According to the article the audit will agree with the RTA and the service boards that "public funding over the years has been insufficient to support the level of transit services provided--producing a broken-down, financially stressed system." It is unclear whether this is Mr. Holland's expression of sympathy with their pleas for more money or a criticism of the RTA for not forcing the service boards to make the painful decisions--service cuts and fare increases among others--that is necessary to size the regional transit system so that it matches the operating funds generated by the RTA sales tax (or both).

The audit will discuss a variety of core problems that include "the CTA's underfunded employee pensions; transit salaries and benefits that are among the highest in the nation; rampant absenteeism at the CTA; and the lack of strong, centralized planning."

Note that the RTA has been much more sanguine about the efficiency of the service boards. In the preliminary Moving Beyond Congestion report (unfortunately no longer available on the Moving Beyond Congestion website), the RTA concluded that the service boards matched up well with their transit system peer group. In the Final Report, the RTA stressed that service board operating expenses have remained constant on an inflation-adjusted basis (pg. 4 of 139) since 1986. The service boards thus may push back hard against Holland's conclusions in their responses to the draft audit, which are due next Thursday.

The audit will criticize the service boards for "fighting each other for customers, routes and federal funding for pet projects that may not fit into an overall regional transit plan." No argument with this conclusion. The fact that the three service boards plus the RTA each take responsibility for applying for state and federal grants is a recipe for such spats, which are unseemly, divert time and attention of senior service board management and do not advance the goal of an efficient and coordinated public transit system.

According to the article, "'The RTA needs to take more of a leadership role in all aspects of transit,' the audit said, adding that the oversight agency may need more authority from the legislature to get the CTA, Metra and Pace to fall into line." Notably, the audit will "recommend that the transit agencies re-examine system expansion plans and focus on bringing the system into a state of good repair." This recommendation just highlights RTA's wrong-headed recommendation in the Moving Beyond Congestion Final Report that almost $6 billion be spent on system enhancement and expansion projects--over 80 percent by Metra and Pace--while the CTA was apparently short-changed $1.1 billion in capital necessary to bring its system back to a state of good repair.

The interesting question is whether the RTA welcomes or fears the final audit report. On the one hand, the audit is likely to be unsparing that the RTA's has failed to function as an effective oversight agency, which will undercut the RTA's credibility as it shills for $12 billion in new money for transit over the next five years. On the other hand, the RTA can point to the audit's conclusion that the RTA "may need more authority from the legislature to get the CTA, Metra and Pace to fall into line" to argue that if the RTA can just get that authority, plus $12 billion, the RTA will be able to set the regional transit system right.

The General Assembly might properly be a bit skeptical at the RTA's pitch given that the RTA has an institutional history of ceding its existing statutory powers to the service boards, of allocating capital in a way that disfavors investment in the core transit infrastructure, of failing over the past 25 years in getting the three service boards to use a common fare medium, and of being unwilling to force the service boards to live within the financial means provided by the steady stream of operating funds provided by the RTA's sales tax.

It is very difficult to effect significant change simply by adding powers to an organization that is embedded in a 25 year old web of working relationships, expectations and the like. Usually, to effect such change you must scramble the institutional arrangements so that new expectations and working relationships can develop. We will discuss one way to do just this in an upcoming post.

Thursday, February 22, 2007

Another Ho-Hum Editorial

The Sun-Times gave the RTA's Moving Beyond Congestion initiative a very cautious endorsement on its editorial page.

The editorial summarizes the RTA's case for more funding. It observes that "no one expects lawmakers to simply hand over the money" and that there "must first be assurances that the agencies are spending the money wisely and efficiently."

Like other commentators, the Sun-Times is placing great stock in the upcoming report by Auditor General William Holland on waste and mismanagement at the RTA and the three service boards (CTA, Metra, Pace).

There is no guarantee, however, that even if Holland identifies such waste/mismanagement he will provide much in the way of solutions. For example, Holland may determine that the service boards could achieve major cost savings through outsourcing some of the work currently being done by unionized employees. Will Holland address how the service boards can get beyond any "no subcontracting" clauses in their labor agreements? Will any solutions he might present to address waste and mismanagement be cost-effective and politically palatable? What if his suggestions yield savings that are only a fraction of the uncovering (and growing) operating deficits?

Nor is there any indication that Holland will tackle some of the key transit funding and governance issues that face the General Assembly, such as the differential in the RTA tax rate between Cook County and the collar counties, the statutory formula for allocating operating funds, and the allocation of RTA board seats based on population rather than ridership, financial contribution levels or some other method. Nor does his charge appear to include policy considerations such as the kinds of powers that should be vested in the RTA.

In short, Holland's report is no substitute for the members of the General Assembly and the media conducting their own assessment of RTA and service board efficiency and preparing their own recommendations for improving the region's public transit system.

The Sun-Times editorial goes on to note that Julie Hamos, the head of the Illinois House Mass Transit Committee, and the Metropolis 2020 group both believe that the RTA is "toothless" and that structural changes are necessary to give the RTA the "power to coordinate regional planning." The editorial does not say if the Sun-Times endorses such structural changes.

The editorial closes by observing that there are no good ways to raise revenue, that further delay in fixing transit funding problems is unsupportable, and that "if we want cleaner air, less congested roads and a thriving economy, the time to act is now, however painful it might be."

The Sun-Times editorial certainly is much more civil than the recent Northwest Herald editorial that described the CTA as a "money pit." It does, however, share with the Northwest Herald the hope that the upcoming Hollard audit will provide a host of large and easily implemented cost-saving measures and that "things must be fixed" before the General Assembly opens the money spigot. Maybe we have regional consensus on this approach.

Wednesday, February 21, 2007

Questions for the RTA: House Mass Transit Committee

The Illinois House Mass Transit Committee, which is chaired by Representative Julie Hamos, is holding a hearing this Friday at which RTA representatives will testify about the Moving Beyond Congestion plan set forth in the RTA's Final Report.

Here are some questions the Committee should consider asking the RTA about the Final Report and its proposal that transit funding be increased by $400 million annually to cover service board (CTA, Metra, Pace) operating deficits and $2 billion annually to fund transit capital improvements:

  • As the Final Report recognizes, the value of the proposed public investment in transit projects must be preserved by transit oriented development ("TOD") policies. To protect their investments in public transit, some public agencies around the country are requiring that local governments have TOD policies in place before the transit agency makes new transit investments in those areas. What legislative measures does the RTA propose to ensure that there will be strong TOD policies in place in the areas where it is proposing increased capital investment in transit?
  • Some public agencies around the country are generating transit funding by capturing a portion of the increase in property values resulting from a transit investment (e.g., a new or rehabbed rail station). Does this RTA support this funding tool and, if so, what legislation is necessary so that the RTA and/or the service boards can implement such a tool?
  • The Final Report identifies traffic congestion relief and environmental benefits (e.g., less air pollution and fuel consumption) as the key benefits that public transit delivers to the region. Would congestion pricing on the region's highway system be a more cost-effective way to achieve these same benefits (through lower and more efficient levels of highway usage) than expanding the public transit system at great cost? Why not?
  • The Final Report discusses congestion pricing and other demand management tools for dealing with highway congestion. Could the region's transit needs be provided more cost-effectively if transit service was priced based on distance traveled (as only Metra does today) and there was congestion pricing during times of peak transit travel (as no service board does today)?
  • What return on investment analysis or other objective criteria did the RTA use when it determined that over 80 percent of the "Invest to Enhance" and "Investment to Expand" capital investments (approximately $6 billion) should go to Metra and Pace even though the CTA carries approximately 80 percent of the public transit ridership in the region?
  • The Final Report states that the proposed capital plan would have a return on investment of only 1.1 to 1 (i.e., $1 invested in the transit capital improvements yields only $1.10 in benefits). The report finds that the ROI for the proposed new operating subsidy is much higher, about 3:1. What would be the amount of capital investment that would be required to fund only those projects that generate a 3:1 return? A 2:1 return? Why should the General Assembly use scare public money to fund capital investments that have only a marginal return when there are other public investments, such in education and healthcare, that may have a much higher rate of return?
  • In the proposed plan Metra's combined operating and capital subsidy is significantly higher than the public subsidy for Pace and the CTA on both a per trip basis and a per passenger mile basis. (See analysis here.) Why was Metra allocated a higher level of public subsidy than Pace and the CTA?
  • Since the RTA achieved its current form in 1983 there has been major increases in jobs and population in the collar counties. Yet, ridership on Pace and Metra has not increased significantly in the collar counties during this period and public transit's market share has dropped substantially. Given this performance during two and a half decades of highly favorable demographic changes, why does the RTA think that sharply increased investment in the Pace and Metra systems in the collar counties is cost effective?
  • The CTA Board recently passed a resolution urging the RTA to reconsider the non-inclusion in the RTA's proposed capital plan of $1.1 billion in capital dollars that the CTA indicated was necessary to bring its system to a "state of good repair." The RTA's Chairman indicated that these capital dollars did not meet the "laugh test" with legislators. Why does the RTA think that the General Assembly should consider the CTA's request for enough capital dollars to bring its existing system into a state of good repair laughable when the RTA is asking the General Assembly to allocate almost $6 billion to "enhance" and "expand" the current transit system? Shouldn't bringing the existing system into a state of good repair take priority over system enhancements and expansions?
  • This Committee's 2005 initial report on the RTA funding formula concluded (pg. 5) that "a significant portion of revenues generated in Cook County suburbs are cross-subsidizing both collar county and City of Chicago transit service." Does the RTA agree with this analysis and, if so, how does the RTA propose to equalize the burden of funding the region's public transit system throughout the region? If the RTA does not agree with this Committee's analysis, why does it disagree?
  • The Final Report lists outsourcing as one way for the service boards to realize cost savings. What are the existing barriers to such outsourcing by the service boards and how might the legislature help the service boards overcome them?
  • The RTA Act requires only $5 million in contributions from local governments. All $5 million goes to the CTA and is from only two local governments, the City of Chicago and Cook County. In light of the benefits of public transit outlined in the Moving Beyond Congestion report, should local contributions be required of more municipal and county governments in the region and, if so, which ones and by how much should local contributions be increased?
  • Most of the RTA's sales tax money is allocated to the service boards according to a statutory formula that differs by region--City of Chicago; suburban Cook County and the collar counties. Does the RTA believe that this formula best serves the State's interest in a strong regional public transit system? If not, should the funding formula be repealed or adjusted and, if so, how?
  • The Final Report lists a variety of ways more money can be raised to fund public transit. Based on its study of transit systems across the country and the world, what funding methods does the RTA recommend to provide a stable and sufficient financial foundation for the public transit system in northeastern Illinois?
  • Does the RTA believe that transit fare increases should be part of the proposed funding package to close the uncovered operating deficit and, if so, what is the optimum level of fare increases?
  • The RTA and the three service board have been in their current configuration for almost 25 years. During that period public transit's share of travel trips has dropped significantly and the RTA and the service boards have been unable to live within the income stream (i.e., RTA sales taxes) provided by the General Assembly. Why should the General Assembly assume that the current structure of transit governance and operations should remain unchanged in light of this weak performance? What recommendations does the RTA have with respect restructuring public transit governance and operations in northeastern Illinois?
  • The Chair of this Committee states on her website that: "I also believe that we need to transform the RTA if we hope to have a regional, integrated transit system, rather than three transit agencies acting independently. The RTA must become responsible for regional planning and coordination by setting annual goals, objectives and performance standards for transit services." Do you agree or disagree with this statement? If you agree, then what measures do you recommend be put in place? If you disagree, what is the basis for your disagreement?
  • The RTA Act (sec. 4.02(b)) designates the RTA as the "primary public body" in the metropolitan region with authority to apply for and receive state and federal grants for public transit. Yet, each of the service boards continue to take the lead in applying for and administering such grants. Why has the RTA given up its authority over the capital program to the service boards and what legislative changes would the RTA like the General Assembly to enact to help ensure that the transit capital program is the most cost-effective and coordinated among service modes as possible?
  • The Final Report notes that reverse commuting from Chicago to the suburbs and commutes between suburban residential and job centers are increasing. In light of these changes in commuting patterns does it make sense, for example, to combine Pace and CTA bus operations to realize economies of scale and to offer more seamless bus service throughout the six-county region? Based on the RTA's research into public transit best practices, what is the RTA's recommendation with respect to the best way to organize the delivery of transit services in northeastern Illinois?
  • Public officials in Kane and McHenry Counties have recently argued that their counties do not receive their fair share of transit service in exchange for the RTA sales tax their counties generate. These counties generate only about $24 million (2005 numbers) in RTA sales tax receipts each year. Transit service in their relatively less densely populated areas is very expensive for the service boards to supply. Consequently, does the RTA favor allowing these counties to leave the RTA while giving them the opportunity to purchase the transit service they want from Pace or Metra?
  • The Final Report asks the State of Illinois to possibly double its annual operating subsidy to the RTA system and to increase its capital support by at least several times over historical levels. In light of the increased financial demands on the State of Illinois, what increased oversight role for the State of Illinois--say through RTA board membership--does the RTA propose?
  • The RTA Act mandates a reallocation of RTA board memberships among the City of Chicago, suburban Cook County and the collar counties based on the 2000 Census. This reallocation was supposed to have been done by July 2003. Why has this reallocation of board membership not been done and what would the allocation of board memberships be pursuant to the 2000 Census?

Tuesday, February 20, 2007

Transit Board Rivalry and Distrust--Finally Resolved

As Chicago Tribune writer Rich Wronski reported, the key RTA officials behind the Moving Beyond Congestion effort met recently with the Chicago Tribune editorial board.

While the Tribune's day-to-day reporting on transit issues is solid, its analysis thus far of the larger transit funding and governance issues has been superficial. (Contrast Crain's.) Thus, it is likely that we will soon see a positive Tribune editorial in support of more transit funding. After all, it is hard to be against public transit. Unfortunately, if past performance is any indication the Tribune will provide us with little in-depth analysis of how best to fund those improvements, whether the RTA's capital improvement plan makes good sense and whether the governance structure for transit in the region should change.

The article does contain this tidbit:

The rivalry and distrust that marked relations among the transit agencies in the past have been resolved, officials said. "We have the full support of the service boards," Schlickman said. "They're committed with us 100 percent."

Apparently, someone forgot to inform the CTA that it is "committed . . . 100 percent" to the Moving Beyond Congestion plan. Just last week, the CTA Board passed a resolution expressing dismay that the RTA's proposed capital plan left the CTA $1.1 billion short of the capital dollars necessary to bring the CTA system into a state of good repair. (You can find the CTA's analysis here--go to "Unfunded Capital Needs.")

CTA Chairman Carole Brown was quoted in this Tribune/Redeye article as follows:

The CTA requested $5.8 billion," Brown said. "Only the CTA would have to shortchange some of its customers because the $5 billion is not enough to address all the needs of the system and get it into a state of good repair."

RTA says that the region provides 2 million daily rides," said Brown, who also sits on the RTA board. "The CTA delivers 1.5 million of those rides."

Jim Reilly of the RTA responded that the CTA could do a lot with the capital money it would get under the proposed plan and then made this observation:

If you ask our other service boards, we didn't fully fund all the needs of Metra and Pace either," Reilly said, adding that any budget figure had to pass the "laugh test" with lawmakers in order for it to be approved.

I suspect the folks at the CTA who are running old buses that never had a mid-life rehabilitation out of bus garages that are decades old or who are in charge of allocating scarce track rehabilitation and repair resources to fix the rail system may take exception to their needs being described as unable to pass the "laugh test." If spending capital money to put TVs on Pace buses can pass this laugh test, surely industry best practices for maintaining a transit system should too.

Yet, the folks at CTA might also be a bit miffed at Chairman Brown. She cast her vote as an RTA Board member in favor of the Moving Beyond Congestion Plan at the RTA Board meeting on February 8th. Just six days later, at the CTA board meeting, she presumably supported the CTA Board resolution criticizing that Plan and asking the RTA to do a more rigorous capital needs analysis that would take into account the CTA's capital needs.

I guess she was for it before she was against it!

Monday, February 19, 2007

Investment Priorities and Missed Investment Opportunties

Previous posts (here, here and here) have questioned the wisdom of devoting 55 percent of the over $16 billion in capital investment proposed by the RTA in its Moving Beyond Congestion Final Report to Metra (50.3%) and Pace (4.5%) when together they carry only 20% of transit customers in the region. It turns out that the RTA's own analysis of this investment results in an anemic 1.1: 1 return on investment.

Maybe the RTA knows something we don't. Perhaps some recent transit oriented development initiatives in the suburbs (e.g., here and here) have encouraged the RTA to believe that this kind of development will transform land-use in the collar counties and result in huge increases in Metra and Pace ridership. Maybe that is why the RTA is recommending shifting capital investment away from the CTA in favor of the Metra and Pace even though the CTA system appears to be falling apart, with bus and rail fleets that are too old and a rail system that is growing slow zones like kudzu.

If the RTA has this information, it certainly hasn't share it with us in the Final Report. That report notes that the "automobile-centric orientation" of the suburban areas is a major challenge for transit (pg. 21) and that "transit works best when there are large concentrations of potential users and significant concentrations of destinations where those potential users want to travel (pg. 23)." It recognizes that "there are significant areas where the density of population is insufficient to support regular [transit] service." (Pg. 23).

While the Report states that "municipalities will need to continue to encourage and support transit-oriented development (TOD) and policies that will make their communities more attractive to--and less expensive for--transit operations before transit becomes an important mode of transportation for the non-work trip" (pg. 24), the RTA fails to recommend that capital investment in transit be linked to implementation of such policies by local governments in the region.

Let's cut the RTA some slack and assume that TOD will become increasingly popular in the suburbs and that the suburbs will be somewhat more attractive to transit operations in the years ahead. Nevertheless, what are the economic benchmarks that will have to be met before heavy capital investment in expanding suburban transit infrastructure becomes more cost-effective than increased investment in the urban core of the region.

To put it another way, if the goal is to increase transit ridership then isn't the current cost of providing a transit trip the best guide to what kinds of capital investments are most likely to advance that goal. Presumably, the marginal cost of adding a new rider is less for current low cost providers than the marginal cost of adding a new rider by higher cost providers.

We demonstrated in a previous post that trips on the CTA are significantly more cost effective than trips on Metra and Pace:

Combined Capital and Operating Subsidy By Trip




(Chart uses 2005 ridership, 2007 projected operating deficits and the RTA proposed 5-year capital plan in the Final Report. Note that capital cost is obtained by dividing proposed five year capital plan amounts by 2005 ridership and may not accurately reflect actual capital costs.)

This data suggests that if the goal is to increase transit ridership, investing in CTA and Pace service is the most cost effective approach. Why spend over $100 per new trip by investing in Metra when the same investment might yield over five new trips on the CTA or Pace?

One can argue, however, that the focus on trip share is misplaced. Rather, the region's goal should be to maximize the number of miles traveled by transit in the most cost-effective manner. What is the combined operating/capital costs by passenger mile:

Combined Capital and Operating Subsidy By Passenger Mile




This analysis suggests that Pace offers the best investment opportunity to get people to rack up more travel miles on transit.

Neither analysis indicates that the RTA proposal to concentrate capital investment on Metra projects is the most cost effective way to generate new transit riders or new passenger miles by transit. Why then is the RTA proposing that Metra's capital share be over three times Metra's ridership share when the data show that Metra is the least cost-effective way to achieve those goals?

Sunday, February 18, 2007

Upcoming House Mass Transit Committee Hearings

From the website of Representative Julie Hamos:

The House Mass Transit Committee will hold hearings in Springfield for three weeks as follows:

Friday, February 23
Friday, March 2
Thursday, March 8

The hearing on February 23 will feature a presentation by RTA on its strategic plan and 2007 budget issues.

In addition, it is anticipated that the Auditor General's year-long audit of RTA, CTA, Metra and Pace will be released in mid-March, and a combined hearing with the Legislative Audit Commission will be held in Chicago at the Thompson Center, on a Monday when the legislature is not in session (March 12, 19 or 26), beginning at 9:00 am. Details will follow.

RTA Tax Effort By Region

RTA sales tax receipts information may tell us more about where people shop than where they live. Nonetheless, it is worth knowing how much RTA tax revenue comes from the various areas that make up the RTA system. I've used 2005 population and RTA sales tax numbers to derive the RTA sales tax per person figures. Recall that the RTA sales tax rate is 1 percent in Cook County and 0.25 percent in the collar counties:

Per Capita RTA Sales Tax Contribution

Chicago $75.32
Suburban Cook $151.75
Cook Total $110.76

Lake $38.90
McHenry $28.40
Kane $31.80
Dupage $47.90
Will $26.65
Collar Counties Total $36.90

On a per capita basis suburban Cook County's RTA sale tax receipts are much higher than in Chicago (twice as much) and the collar counties (four times as much). It is no wonder that the House Special Committee on Mass Transit concluded in its April 2005 report on the transit funding formula (available here) that under the current RTA taxing and funding arrangements suburban Cook County is subsidizing transit service in both Chicago and the collar counties.

Saturday, February 17, 2007

Transit "Money Pits:" What Does The Data Show

A recent editorial in the Northwest Herald describes the CTA as a "money pit" and argues that the suburbs should not be asked to throw more money into this pit. Let's do a little number crunching to see if we can better understand who gets what under the RTA's Moving Beyond Congestion proposal outlined in its week-old final report (the "Report"). Is the CTA the "money pit" as portrayed by the Northwest Herald and various suburban public officials?

We'll use 2005 ridership numbers reported by the RTA and 2005 passenger mile and vehicle revenue mile information for the three service boards--Chicago Transit Authority, Metra and Pace--from the National Transit Database. The 2007 and 2007 operating deficit numbers are from the RTA's 2007 Budget Book (available here). The capital numbers are drawn from the Report.

The data show that by just about every measure the suburban service boards--Metra and Pace--receive a higher level of public subsidy than the CTA. This applies to both capital and operating subsidies.

Apples to apples comparisons are difficult, of course. The service boards serve different regions. The CTA's service region is limited to most of Cook County. Pace and Metra serve the entire six-county region. The service boards also have different service mixes. Metra is rail only. Pace is bus only. The CTA has both trains and buses, with buses carrying roughly 60 percent of the passenger load.

Despite these differences, the data strongly suggest that on a comparative basis with the other service boards the CTA is not a "money pit." Two figures stand out. First, the current per trip operating subsidy that must be paid by the public through taxes and fees is over twice as high for Metra ($3.48/trip) and Pace ($3.05/trip) than it is for the CTA ($1.26/trip). Second, the per trip five-year capital subsidy is especially generous to Metra ($105.27/trip) relative to Pace ($19.42/trip) and the CTA ($15.80/trip).

(Note: By "per trip five-year capital subsidy" I have just divided the projected five-year capital allocations under the RTA's proposed capital plan by the 2005 service board ridership figures. This is to illustrate the relative intensity of the RTA's proposed capital investment under the Moving Beyond Congestion proposal. Since capital investments last for many years the actual capital cost per trip likely is much different (and beyond my capabilities to calculate)).

Here are the findings (all numbers in thousands). We start with the distribution of capital under the proposed five year capital plan and move on to look at how the operating deficit--and hence subsidies--are to be allocated in the 2007 budget and in 2009, the second year of the current two year operating plan:

Distribution of Capital (2007-2011)

By Service Board

CTA $7,284.1
Metra $8,105.6
Pace $718.4

Note: The CTA carries 80 percent of the transit customers in the region.

By Trip

CTA $15.80
Metra $105.27
Pace $19.42

Note: Pace gets a higher level of capital subsidy per passenger trip than the CTA even though Pace does not have any rail infrastructure. Rail infrastructure is much more capital intensive than buses, which run on public roads. Forty percent of the CTA ridership travels by rail.

By Passenger Mile

CTA $3.76
Metra $5.24
Pace $2.63

Note: Metra's all-rail service model likely accounts for higher figure.

By Vehicle Revenue Mile

CTA $48.48
Metra $211.86
Pace $19.46

Note: Metra's all-rail service model likely accounts for higher figure.

Allocation of 2007 Total Operating Deficit

By Trip

CTA $1.26
Metra $3.48
Pace $3.05

Note: This means that the public operating subsidy per ride is much less with respect to trips on CTA compared to trips on Pace and Metra.

By Passenger Mile

CTA $0.30
Metra $0.17
Pace $0.41

Note: Metra is a low-cost provider on a passenger mile basis in terms of operating expense. As shown above, however, on a passenger mile basis Metra service eats up a much larger share of capital dollars.

By Vehicle Revenue Mile

CTA $3.86
Metra $7.00
Pace $3.05

Allocation of 2009 Total Operating Deficit

By Trip

CTA $1.67
Metra $3.62
Pace $3.37

Note: The CTA's operating deficit per trip is projected to rise much faster than that of the other service boards. This is a disturbing trend that reflects the CTA's serious pension/collective bargaining problems.

By Passenger Mile

CTA $0.40
Metra $0.18
Pace $0.46

By Vehicle Mile

CTA $5.14
Metra $7.28
Pace $3.38

Thursday, February 15, 2007

Is The Moving Beyond Congestion Coalition Beginning to Unravel?

The Northwest Herald followed up on its recent article quoting the revanchist sentiments of the McHenry County public officials, who seem to want to pull out of the RTA, with a blistering editorial entitled "No Bailout for the CTA."

The editorial argues that "residents of McHenry County already pay far more into the system than they get back in services." It goes on to state that these residents " would be shortchanged in almost every one of the funding options being floated to rescue the RTA."

It is interesting that the editorialist seems to think that he/she is taking a jab at the CTA by observing that "half of the RTA's $226 million deficient belongs to the Chicago Transit Authority." Since the CTA provides 80% of the transit trips in the region, the fact that the CTA accounts for only half of the RTA's deficit could be considered a sign of profligacy by the suburban service boards, Pace and Metra.

Indeed, according to the RTA's 2007 budget, Pace's uncovered deficit in 2007 is $22,876 for its mainline (i.e., non-ADA) service while the CTA's uncovered deficit is $110,000. On an uncovered deficit per passenger trip basis (using 2005 ridership numbers) Pace performs much worse than the CTA:

Uncovered deficit (2007) per passenger trip

Metra: 13.7 cents
CTA: 23.8 cents
Pace: 61.9 cents

The editorial points to the upcoming performance audit by Auditor General Holland and urges: "Let's see where the money is being mismanaged--and correct that--before looking to the suburbs to bail out the city with an RTA property tax." Given these numbers, the Northwest Herald should not assume that Holland's audit will bash the CTA but consider Pace and Metra to be exemplars of good management. (Note that the editorial says that the audit will finally be released in early March.)

Hopefully, Holland's audit will cast a critical look at the RTA/Moving Beyond Congestion Final Report recommendations. He might examine, for example, why so much of the new capital dollars are being pumped into suburban service boards that together carry only 20 percent of the public transit riders and predominately serve collar counties that are demographically and culturally resistant to traditional forms of public transit, especially buses.

In any event, the editorial ends on a shrill note worthy of Pate Phillip: "The average suburban taxpayer gets little benefit from the RTA. Do not call on him or her to rescue the money pit known as the Chicago Transit Authority."

You would think from this editorial that folks in Chicago must be dancing in the streets, celebrating their upcoming fleecing of suburbanites to fund the CTA. Actually, they are contemplating the upcoming mother of all slow zones on the northside rail lines, the latest blow to a rail system laid low by insufficient capital investment.

According to this NPR report (listen here), the Chicago Transit Authority Board passed a resolution urging the RTA to change the proposed distribution of capital funds to shift more of those funds to the CTA. The report states that the CTA argues that its capital infrastructure is three times the size of the combined Metra/Pace infrastructure, yet under the RTA's proposed five-year capital plan the CTA gets less than half of the capital dollars for transit in the region. The CTA argues that it should get an additional billion dollars to meet its needs.

So there you have it. The suburbanites feel they are getting fleeced by the RTA's proposed funding plan and the CTA believes that same plan shortchanges the CTA.

Wednesday, February 14, 2007

Let My Counties Go: Kane and McHenry Counties Should Leave the RTA

The House Committee on Mass Transit's Report on Transit Funding Formula (available here) concluded that suburban Cook County residents are subsidizing transit service in both Chicago and the collar counties.

The collar counties, however, feel that they are being shortchanged. Kane County officials beat up on the RTA's Steve Schlickman and other Moving Beyond Congestion representatives a few months ago. A recent story in the Northwest Herald reports that the folks in McHenry County feel that they are being shortchanged as well.

As the Northwest Herald article reports, these suburbanites are upset that the RTA gives almost all of its discretionary operating dollars to prop up the CTA. The RTA draws these discretionary funds from the 15% it takes off the top of the RTA sales tax receipts (and the 25% State match of these receipts). The article quotes Aaron Shepley, Pace board member and Crystal Lake mayor, that “I think any tax increase that is levied upon the RTA area will be used to bail out the CTA. Period. End of story.” Shepley goes on to say that “I’ve got news for you – we’ve been bailing them out for years.”

While these authorities downplay the fact that the collar county RTA sales tax rate is only one-quarter the tax rate in Cook County, they are quick to point up perceived deficiencies in the level of transit service in the far flung suburbs. At least Mr. Shepley recognizes that the suburban layout "is not friendly to traditional bus routes."

Rep. Mike Tryon, a Crystal Lake Republican who sits on the House Mass Transit Committee, suggests that McHenry County be allowed to keep its financial contribution to Pace and run its own bus system. Indeed, as this article reports, some suburban municipalities are subsidizing trips by taxi for their residents. There may actually be a demand for publicly funded transit service in relatively low density suburban areas that Pace and Metra may not be suited to provide.

At the same time the folks from McHenry and Kane Counties are fulminating, the RTA's recent Final Report from its Moving Beyond Congestion effort recommends that more than half of the capital investment for transit in the region over the next five years should go to Metra and Pace. Much of this investment will go to expand the transit system in outlying counties like McHenry and Kane.

Put these elements together--strong sentiment against the RTA in much of the collar county area and large capital requirements necessary to expand the transit infrastructure in this area--and maybe you get the elements of a "less is more" solution.

Consider this package. Limit the RTA to counties with more than 500,000 in population. This would leave Cook, DuPage, Will and Lake counties in the RTA. Let Kane and McHenry counties leave the RTA. The RTA would thus lose the two least densely populated counties (with the highest per capita anti-RTA whining levels) in the region.

Allowing Kane and McHenry counties to secede from the RTA would result in a loss of about $25 million in RTA sales tax revenue. This revenue loss could be more than made up by doubling the sales tax rate in Lake, DuPage and Will counties to 0.5%, still only half the tax rate in Cook County.

Lake, DuPage and Will Counties have the most potential to support viable public transit of the five collar counties. Lake County has a strong mix of residential development and employment and well-developed commuting links to Chicago and soon, perhaps, with Milwaukee. DuPage County has almost one million people. It has an employment and shopping belt along I-88 that cries out for a direct connection with Chicago. Will County is a net exporter of people to jobs in these areas, so the potential is there for high-speed bus service and the like in the I-355 and I-294 corridors.

What about transit service in Kane and McHenry counties? They would be empowered to continue to collect the RTA sale tax, but this time for their own use. They would be allowed to use this money to purchase transit service at cost from Metra and Pace and/or fund their own transit services.

If the protestations of these Kane County and McHenry County public officials to the effect that their counties are being shortchanged by the RTA are true, then these monies should be sufficient for the counties to support improved transit service in their counties. They also would have the flexibility to utilize private sector resources (e.g., subsidized taxis and jitneys) and service methods (e.g., dial-a-ride) that the RTA and its service providers cannot or will not provide.

Getting these two counties and the negative vibe created by their political supporters out of the RTA system would help the RTA "sell" its Moving Beyond Congestion package to the General Assembly. For all we know, allowing them to leave the RTA system as part of this package might turn these counties in avid supporters of the package. Keeping these counties in their malcontents in the RTA will put almost irresistible pressure on the RTA to attempt to buy their support by allocating far more capital investment and operating subsidies to these areas than prudent transit practices would indicate. (Indeed, it appears that the RTA already has succumbed to that pressure: here and here.)

Getting the two counties in the region least suited to public transit out the RTA system would be a boost to Metra and Pace and the RTA itself. The capital investments in McHenry and Kane are likely to have much lower return on investment than investments in areas in the counties with greater density and a stronger existing public transit infrastructure. Thus, the RTA could scale back its proposed capital plan--making it more palatable to the General Assembly--if those counties no longer were the RTA's responsibility.

Likewise, transit service in Kane and McHenry counties likely has a lower farebox recovery ratio than service elsewhere in the region. Excising these counties from the RTA will help Metra and Pace meet the farebox recovery ratios assigned to them by the RTA to meet the systemwide 50 percent farebox recovery ratio mandated by the RTA Act.

Some might object that decreasing the size of the RTA defeats the purpose of regionalism. However, Kane and McHenry would stay within the purview of CMAP and be subject to the region's metropolitan planning organization. The existing provisions in the RTA Act (section 3.06) that allow outlying areas to join the RTA would remain. The two counties could petition to get back into the RTA family if one or both of them find that going it alone on transit is not a piece of cake.

The deciding question should whether the current RTA geographical structure leads to the best and most cost effective transit service in the region. If these two collar counties say no and if the RTA and the service boards will benefit from not having to provide service to these relatively low-population areas, then it is a win-win proposition to scale back the RTA to the four counties in the region most suited to public transit.

Maybe the locals in McHenry and Kane Counties will beat a hasty retreat if presented with this opportunity to leave the RTA. Then we will know that they have been blowing smoke all along about being treated unfairly by the RTA. But maybe their rugged spirit of independence (and their spirit of innovation) will prompt them to leave the RTA system and strike off on their own.

So be it, and good riddance.

Monday, February 12, 2007

RTA Capital Plan Trips Over ROI

The previous post questioned the wisdom of the proposal of the RTA and the Moving Beyond Congestion proponents in their recently-released Final Report for $10 billion in additional capital funding for public transit in the six-county region over the next five years. That proposal results in the following allocation of the available and proposed new capital dollars:

CTA 45.2%
Metra 50.3 %
Pace 4.5%

In other words, the CTA gets a bit more than half of the capital dollars relative to its 80% share of transit riders in the region while Metra's share of capital dollars is more than three times as large as its 14% share of transit riders.

Almost $6 billion of the proposed package is devoted to projects that "enhance" or "expand" the region's public transit system. Here the emphasis on suburban transit investments over investments in the urban core of the region that generates 80% of the trips by transit is even more pronounced:

CTA 16.9%
Metra 75.9%
Pace 7.2%

The Report itself casts serious doubt on the notion that the region is likely to maximize the benefits from an increased investment in public transit--e.g., traffic congestion relief--by concentrating that investment on transit serving the relatively low-density suburban areas.

Pages 69-76 of the Report contains a return on investment analysis of the $10 billion in proposed new capital investment and the $2 billion in proposed new operating subsidies. The ROI analyses considers five categories of benefits associated with public transit:

Direct user benefits (e.g., cost savings received by transit users)
Reduction in accident rates (travel on transit is safer than travel by car)
Reduction in air pollution
Reduced need for parking spaces
Reduced roadway congestion

Through various assumptions and methodologies the RTA came to the following conclusions:

Capital Investment ROI

Cost: $12.4 billion (includes both existing capital funding and $10 billion in new funding)
Benefit: $13.6 billion

ROI: 1.1 to 1

Operating Subsidy ROI

Cost: $10.1 billion
Benefit: $28.8 billion

ROI: 2.9 to 1

The projected ROI for the capital plan--which is heavily tilted to suburban transit--is marginal at best. A dollar of capital investment yields only $1.10 of benefit.

The projected ROI for the proposed new operating subsidies--which will go predominately to the CTA--is much more robust. A dollar spent for that use yields almost $3 of benefit.

I'm no economist, but doesn't the meager ROI for the proposed capital plan suggest two things that are not necessarily mutually exclusive. First, it suggests that the plan results in an over investment in transit and that the optimum level of investment--one that will generate a more robust ROI--is much less than $10 billion. Second, the anemic ROI suggests that the proposed plan focuses investment in the wrong places, namely, in areas that lack the density and transit-supportive land-use policies necessary to sustain a public transit system with high ridership levels.

Can we infer even more from this striking ROI differential? The robust ROI from the proposed operating subsidies suggest that even more investment in transit serving the urban core will yield a higher ROI than heavy capital investment in new suburban transit. In other words, if the operating subsidies necessary to maintain the CTA system yield a 3:1 ROI then maybe it makes sense to fund additional service in the urban core until the ROI begins to drop off.

There should be some ROI standard--let's arbitrarily say it might be 2:1--that will come when money now allocated predominately to expand the suburban transit infrastructure is reallocated to transit in the urban core. As that reallocation proceeds, the remaining suburban investments will presumably show an increased ROI and the new urban core investments will show a decreased ROI. At some point in the reallocation process we will hit that ratio sweet spot whatever it might be.

Again, I caution that I am not an economist. Nevertheless, the anemic ROI associated with the RTA's proposed capital plan that is heavily tilted in favor of suburban transit and the relatively robust ROI associated with operating subsidies directed at transit serving the region's urban core should be a warning. That ROI disparity is a warning that the request for more funding by the Moving Beyond Congestion proponents and the RTA and their proposed allocation of those new funds may not be in the region's best interest.

Saturday, February 10, 2007

MBC Final Report: Capital Offense?


The Final Report of the Regional Transportation Authority's Moving Beyond Congestion project is driven by three scenarios: Invest to Maintain the existing public transit system; Invest to Enhance that system; and Invest to Expand that system.

In earlier posts (e.g., here, here and here) we have questioned the wisdom of the Invest to Expand scenario. It appears that this level of capital investment in the regional transit system will not deliver significant incremental gains in public transit ridership, traffic congestion relief, or environmental benefits.

The Final Report does nothing to allay these concerns about the Invest to Expand scenario.

The RTA's Leap of Faith

A big assumption in the Final Report, like the earlier Moving Beyond Congestion interim report, is that there is significant unmet demand for public transit in the collar counties. The corollary assumption is that this demand can be tapped into only through billions of dollars of new capital investment, plus the increased operating costs that it will take to run this expanded and enhanced system.

The performance of suburban transit providers since the RTA was established in its current form in 1983 indicates, however, that this assumption is weak at best, a politically-driven fantasy at worst.

After all, since 1983 there have been major increases in population and jobs in the collar counties. As the Final Report discloses (pg. 21), for example, between 1990 and 2000 two-thirds of the region's growth in work trips occurred in the collar counties. Between 2000 and 2005--a mere 5 years--while population was dropping in Cook County the collar counties saw their population grow at rates from 2.8 percent (DuPage) to 28.1 percent (Will).

In addition to these highly favorable demographics, the RTA made sure that Metra was getting a share of transit capital dollars three times its share of regional transit riders. The RTA also was setting Pace's farebox recovery ratio much lower than the CTA or Metra ratios.

Despite these advantages, Pace and Metra's performance in the collar counties lagged. Reading between the lines of the Final Report (pg. 21) it is evident that their market share of trips in the collar counties has dropped since 1983.

In sum, there does not appear to be substantial untapped demand for public transit in the collar counties. It would take a much different environment--e.g., much higher gas prices and/or tolls or other fees--to get folks out of their cars. As the Final Report acknowledges, "the dramatic growth in intra-suburban commuting is a major challenge for transit, given the automobile-centric orientation of many suburban developments." (Pg. 21)

Proposed Distribution of Capital

The Final Report exposes the RTA's failure to critically examine and then prioritize the capital needs of this region's public transit according to performance-based criteria.

The 2007 RTA Budget allocates existing capital dollars to the three service boards as follows (all figures in millions):

2007 RTA Budget

$1,524.3 -- 54.1%

$1,107.7 -- 39.3%

$186.7 -- 6.6%


Recall that the CTA provides 80 percent of the transit trips in the region. The Invest to Maintain scenario increases the CTA's share of capital dollars somewhat, but Metra's share of capital dollars remains over double its current 14 percent trip share:

Invest to Maintain Scenario

$6,300 -- 61.2%

$3,700 -- 35.9%

$300 -- 2.9%


The Invest to Enhance Option shifts an ever higher share of capital dollars to Metra and Pace, who together provide 20 percent of the public transit trips in the region:

Invest to Expand Scenario

$328.9 -- 30.4%

$405.6 -- 37.5%

$348.4 -- 32.2%


The shift of transit capital dollars to support transit service in the "automobile-centric" oriented collar counties is even more dramatic in the Invest to Expand scenario:

Invest to Expand Scenario

$655.2 -- 13.9%

$4,000 -- 84.7%

$70 -- 1.5%


Together, the Invest to Enhance and Invest to Expand scenarios will allocate over 80 percent of the capital money for regional transportation improvements into the two service boards who carry only 20 percent of transit customers and who have been unable to grow their market share significantly despite 25 years of favorable demographic trends and treatment by the RTA:

Combined Invest to Maintain/Invest to Expand Scenarios

$984.1 -- 16.9%

$4,405.6 -- 75.9%

$418.4 -- 7.2%


The total capital investment package proposed by the RTA and the Moving Beyond Congestion proponents represents an unprecedented shift of capital money to Metra and Pace from the CTA:

Three Scenarios Combined

$7,284.1 -- 45.2%

$8,105.6 -- 50.3%

$718.4 -- 4.5%


The proposed capital allocations under the combined three scenarios compared to market share is as follows:

Capital Allocation (3 Scenarios Combined) vs. Market Share

Market Share: 80%
Capital Allocation: 45.2%

Market Share: 14%
Capital Allocation: 50.3%

Market Share: 6%
Capital Allocation: 4.5%


Explanation One: Machiavelli Approach

Perhaps the Moving Beyond Congestion proponents are hard-headed political realists with an understanding that intensive public transit only makes sense in relatively densely populated areas that are not "automobile-centric" oriented. They know they must get more money for the CTA, which has been shortchanged of capital for years and whose system is breaking down. They also know that they need the support of suburban legislators and their constituents.

These hypothetical political realists know that in the current political environment they are unlikely to emerge from Springfield with the full $10 billion in new capital dollars over the next five years.

Their strategy thus is to dazzle the suburbanites with the prospect of 80 percent of the Invest to Enhance and Invest to Expand scenario dollars--money that will fund all sorts of suburban transit infrastructure and service. But these realists know full well that these projects and these two scenarios will fall by the wayside during the legislative process, leaving CTA with a somewhat greater share of capital dollars than it is slated to get under the current RTA budget.

Mission accomplished. The disappointed suburbanites will just have to wait under the next big capital program, but they can console themselves that Pace and Metra will continue to get a share of capital dollars much larger than their trip share combined.

Explanation Two: True Believers

There is a more disturbing explanation for why the RTA plans to devote almost 55 percent of total capital dollars, and over 80 percent of new capital dollars once the Invest to Maintain projects are funded, to Metra and Pace. That explanation is that the RTA truly believes that the "automobile-centric" collar counties are where transit capital investment is likely to do the most good in terms of increasing transit ridership, reducing traffic congestion and the like.

Such a notion flies in the face of the reality that population density is crucial to the success of public transit. Public transit trips almost always take longer than trips by private car. Transit may not be disadvantaged that much in densely populated areas (e.g., traditional urban cores) because trip distances are less and private autos are slowed by frequent stoplights and the like. In the suburbs, however, trip distances are longer and travel by car usually is faster than in the urban core. Together, these factors result in a speed/time differential that is felt acutely by travelers and places transit at a huge competitive disadvantage for most suburban trips.

Maybe the RTA truly believes that with billions of dollars of more investments in suburban transit it can overcome this structural disadvantage and fill those Pace buses with folks happily narcotizing themselves on the free TV on those buses. Our national adventure in Iraq and the federal government's investment in abstinence education rather than sex education suggest that faith-based policy making is not all that unusual these days.

Explanation Three: True Believing Machiavellians

There is even a more disturbing possibility. That is that the RTA believes that the future of the region's public transportation system is in the collar counties. And, the RTA also believes that the CTA is so weakened by its need for operating subsidies and its poor operating performance (in part a function of the CTA's insufficient share of capital over the years) that the RTA and its suburban allies can wrest an even bigger share of capital dollars from the CTA.

Had not the most recent November election turned out as it did, this explanation would have been the most likely explanation for why the RTA is recommending a shift of an even greater share of capital dollars away from the CTA. It seems unfathomable in the current political environment, however, that the RTA truly believes that it can pretty much write the CTA out of a meaningful share of the capital dollars devoted to "enhancing" and "expanding" the region's public transit system.

* * *
My guess is that a few highly-placed persons at the RTA fall within the Machiavelli camp (explanation #1). As for the rest of the RTA, those folks have listened to the siren songs of Metra and its suburban patrons for so long that they may actually believe that heavy investment in areas least suited for transit is the best use of the region's transit capital dollars (explanation #2), while some--a declining number--still yearn to "stick it" to the CTA and the City of Chicago (explanation #3).

The RTA/MBC's baffling capital investment policy recommendation is perhaps the best argument for why the RTA either needs to disappear or be replaced by an agency with the power--and more importantly the appetite--to move capital dollars to where they will produce the most transit ridership, traffic congestion relief and other benefits associated with transit.

Let's hope that the General Assembly and the Governor make a more critical, reality-based examination of the facts before pouring billions of dollars more into a suburban transit infrastructure that has failed thus far in growing transit trip share despite relatively favorable population and job growth trends.