Tuesday, May 8, 2007

Metropolis 2020 Blockbuster

Chicago Metropolis 2020 has released a six-page proposal entitled "Building a Great Transit System for the Chicago Region" that addresses the RTA authority, transit funding, and transit governance issues simply and well. It is worth a close read.

RTA Governance

The Proposal endorses Representative Hamos' so-called RTA reform bill (HB 1841) but indicates that the bill does not go far enough. Most notably, the Proposal recommends that the RTA should be empowered "to promote transit-oriented land development throughout the region as a means to enhance transit ridership and to accommodate population growth without depending solely on highway construction." These words no doubt will send a tremor of alarm throughout the suburban region, where mayors, village councils and developers continue to work together to enable auto-centric sprawl while loudly complaining that their towns don't get enough public transit service.

The Proposal has several other recommendations that go beyond the Hamos bill. These include authorizing the RTA to enter into agreements with local governments to "undertake and fund transit-related plans, programs or projects that support the RTA's goals and objectives." In addition, the RTA will be required "to allocate federal transit formula fund for capital projects based on clear criteria consistent with RTA goals, polices and performance." Another recommendation is that the RTA be required to give prior approval to any federal transit capital grant application in the RTA region.


The Proposal starts from the premise that the RTA region must "face the reality that if we are to build and maintain the type of transit system our region need, we [i.e., the RTA region] will have to raise most of the $2.4 billion needed yearly ourselves." It proposes the following:

Operating Revenue (new money)

  • RTA region: $320 million
  • State: $80 million

Capital Funding (new money)
  • RTA Region: $700 million
  • State: $700 million
In other words, the Proposal is recommending that a bit over $1 billion in new money for public transit be raised in the RTA region. (This amounts to roughly $100 per capita per year in new money). The Proposal offers a menu of new funding sources.

Proposed Funding Sources

  • An RTA imposed gas tax of up to 5 percent (up to $325 million). Policy basis for gas tax is that motorists are the beneficiaries of the public transit system and should be "directly involved" in paying for the system.
  • Increase the RTA sales tax in the City to 1.25% ($85 million) and up to 1.0% in the collar counties ($345 million).
  • Adopt distance-based, time of day, and other such pricing measures ($90 million through a 10 percent increase in fare revenue).
  • Find the holy grail of an integrated electronic fare system ($36 million).
  • Broaden the RTA sales tax to include consumer services ($200 million and presumably more if sales tax rates are increased in Chicago and collar counties).
  • Tax on non-residential off-street parking (up to $300 million).
  • Fix the "structure and financing" of the CTA's pension system (go figure).

Some quick observations:

1. It likely will be a tough sell to increase the collar county sales tax rate more than an increase in the Chicago sales tax rate.

2. How does this proposal square with the Governor's pledge not to raise taxes on the working people of Illinois? Does the RTA region seek a legislative declaration that its population is composed of layabouts, a measure that would likely attract plenty of downstate votes? Perhaps a requirement that any transit funding increase be approved through a referendum would finesse this issue. Maybe it is enough that any increase would be imposed by the RTA and not the State of Illinois itself.

3. The proposal makes no mention of how to deal with the dysfunctional labor relations situation at the CTA, which holds up resolution of the pension funding problem and prevents the CTA from subcontracting work and taking other cost-effective measures.

4. It is surprising that Proposal fails to advocate for congestion zone pricing, such as exists in London and is proposed for New York. Congestion zone pricing targets auto travel in areas most heavily served by public transit so the linkage between the "tax" and the benefits of a transit system is much stronger than a generalized gas tax. Why should the working stiff in Will County with a 40 mile commute to the northern suburbs and no transit options pay far more than the Chicago resident who chooses to drive to the Loop or the airports.

5. The proposed parking tax dovetails with yesterday's Tribune article on the growing movement against free parking. It will be a tough sell to tax a big box retailer in the suburbs whose store is served by little or no public transit at the same rate as retailers in more densely populated areas well served by public transit. Perhaps the region should consider a base parking tax that funds local transportation improvements and a congestion surcharge devoted to public transit that is based on the congestion levels in the area.

More on this and the transit governance recommendations tomorrow.

Anyone want to speculate on whether this proposal has been reviewed and approved by Representative Hamos?


Anonymous said...

Ok Moderator--over time, you've moved towards clarity of logic..especially on this post. It wasn't so with the earlier posts. So...no more cryptic comments and maybe not so much sarcasm ..here goes, in abbreviated form:

1) In economic terms, Metra's radial system is primarily a means of keeping down labor costs for the downtown labor markets at the destination, due to the alternative costs of driving and parking, etc. In this context, the benefit accrues to the downtown real estate market as a direct subsidy to supply "cheaper" labor for a given use of the land.

2) At the origins (many) along the radial system, proximity to the Metra Rail transit system results in a 5 to 10 percent value premium on the private housing markets, and that benefit accrues to the residential real estate markets and the owners of the land within 1/2 mile of a station-- generally. (BTW who has large interests in both the downtown office and the suburban TOD markets?)

3) The marginal costs of these subsidies are born by the payers of sales tax and the purchasers of transit fares.

4) The secondary value on the land at the lone destination and the many origins, accrues to the county in which the real estate taxes are collected.

5) Downtown real estate is proportionately undervalued or reassessed thanks to the Cook County Appeals system.

6) None of that value on the land is captured from any of the current or proposed Rail Transit Investments and no one dares to suggest it. To the contrary, CM2020 seeks to further sweeten the deal with direct RTA funds for development naively know as "TOD" but more appropriately, "DOT".

7) Any wonder the fascination with expensive rail projects when bus does all the work?

8) Any idea what a proximity value capture tax (say 1/2% on residential and 1% on all others) on assessed valuations in the 6 county region would generate? WOW

9) Most ironic-- people and politicians have been duped into paying, protecting and committing to a regional/political transit funding struggle when in fact it is something altogether different.

10)Is it about the transit or is it about the money?

Anonymous said...

As the transit bosses and their confederates ratchet up the lobbying campaign in their latest and biggest ever raid on the public fisc, I am reminded of comments by former Metra Board Chairman Jeff "bump and thump" Ladd several years ago in the midst of a executive pay/bonus kerfuffle at Metra.

Defending the bonuses, Ladd is quoted in the press as follows: "[Giving bonuses] is commonplace in provate industry. It may be exceptional in government, but we always try to run Metra as a business rather than a government agency". (Chicago Sun-TImes, December 3, 2004).

What kind of business receives half of its operating expenses and nearly all of its capital expenses from the public fisc? If Metra is really serious about operating as a business, perhaps it ought to start raising its commutation fares to more closely approximate the true cost of its product. RIght now, Metra and the other transit agencies are selling their product in the marketplace at below the cost of production - a practice known in business as dumping. Similarly, maybe Metra can go to the private capital markets to obtain financing for its ambitious expansion plans..

Ladd is long gone, but the point is these transit guys need a civics lesson about what they are - public servants; who they work for - government agencies; and who they are responsible to - taxpayers.

Anonymous said...

Not surprising that a business group advocated mostly consumer taxes. I wonder what their position is on the Governor's view that the gross receipts tax apparently should pay for this (as well as health care and schools).

Anonymous said...

Everyone reading this blog should weigh in on the comments section of this blog.

Moderator said...

Commentator #4--

Your link is a hoot! Thanks for the chuckle.

But shouldn't we all focus on public transit issues and not idle speculation on the identity of Moderator?

After all, what would transit afficionados do if they knew that identity? Offer Moderator an autographed copy of the 1984 RTA Universal Farecard Implementation Plan? Pull out the tar and feathers?

Justin said...

Commentator #1: you make some great points. I agree that accessibility gains from rail are often capitalized into real estate markets, and that this makes reliance solely on a sales tax to funding transit questionable. But I'd also say that transit creates other value besides what is captured in land prices.

I'm curious: how would you respond to the argument that the Loop deserves/needs transit service because of the positive externalities associated with urban agglomeration? Or that it is impractical to serve the intensity of activity in the Loop with cars? Some would argue that this is the reason cities exist.