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.

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