Friday, July 13, 2007

Is SB 572 A Suburban Bailout of the CTA?

In an unguarded moment some weeks ago, RTA Chairman Jim Reilly told a group of DuPage County public officials that Metra was the "winner" under the RTA reform package that has become S.B. 572. Yet, as Eric Krol reports in the Daily Herald, some suburban politicians are complaining that the package is unfair to the suburbs.

U.S. Representative Mark Kirk, the co-leader with Representative Melissa Bean of the Suburban Transportation Commission who has grandstanded at several Commission hearings, figures prominently in the article, as do State Representatives Michael Bond and Jim Durkin. Here's the basis of their opposition to SB 572 as reported by Krol:

Here’s specifically why some don’t like the plan: By Bond’s calculations, which are backed up by a legislative analysis, the suburbs would be paying $220 million more in sales tax. The city of Chicago would pay an additional $100.5 million in sales and real estate transfer taxes.

But of the $322.5 million collected, the CTA would get $193.5 million, Metra $96.75 million and Pace $32.25 million, according to the analysis. The CTA gets 60 percent of the booty, but city folks are paying only about a third of the new taxes.

For years, the suburbs have watched 15 percent of every transit sales tax dollar go to the RTA, which then funnels nearly all of it to the CTA, and they’ve been cool with that — after all, Metra commuters often get on CTA buses and trains when they arrive downtown. But critics see the new tax as a double-whammy for the suburbs.

There are at least four flaws in the "CTA bailout" claim:

First, it appears that City of Chicago taxpayers will be contributing more than $100.5 million in new tax revenue. The Illinois Department of Revenue has estimated that the real estate transfer tax, which will be imposed in Chicago only if SB 572 passes, will raise about $99 million by itself. The 0.25% increase in the existing RTA sales tax in Chicago will raise at least $50 million, for a grand total of about $150 million. This is 50 percent higher than the tax increase number used by these suburban critics. Obviously, there is some disconnect between the revenue assumption used by Representative Hamos ($42 million) and that calculated by the Department of Revenue ($99 million) with respect to the impact of the real estate transfer tax.

Second, this critical analysis of the CTA "bailout" is premised on the assumption that no suburbanite rides the CTA. The Auditor General's Report indicates (pg. 325 of 450), however, that about 22.7% of transit trip boardings and 18.6% of passenger miles taken on transit by suburban Cook County residents are on the CTA. The sales tax increase in suburban Cook County will raise close to $100 million. Taking a midpoint percentage of 20% between trips and passenger miles, this yields $20 million. This amount, plus the $150 million being generated by the City equals $170 million, not far from the $193.5 milllion that the CTA will be getting under the Kirk, et al. analysis.

Third, the proposed new operating money for the CTA is in line with what one might expect it to receive based on several common metrics. For example, compare the reported distribution of the proposed new operating subsidies:

Proposed Distribution of New Operating Money
CTA - 60%
Metra - 30%
Pace - 10%

with the following distributions:

Passengers (2005)
CTA - 80.2%
Metra - 13.4%
Pace - 6.4%

Passenger Miles
CTA - 55.1%
Metra - 41.2%
Pace - 7.3%

When the proposed new operating money is considered as a percentage of total operating revenue and total operating expense, Pace not the CTA comes out the winner:

New Operating Money as Percentage of Service Board 2007 Total System Generated Revenue
CTA - 35%
Metra - 33.9%
Pace - 60.4%

Source: (RTA 2007 Budget Book at pg. 31 of 146)

New Operating Money as a Percentage of Service Board Total Operating Expense
CTA - 17.1%
Metra - 17.5%
Pace - 19.4%

CTA riders certainly do not come out ahead under the allocaton of new money on a per trip basis:

New Operating Money Per Trip
CTA: $0.42
Metra: $1.26
Pace: $0.87

Fourth, the collar counties, which are pushing for expensive new Metra projects like the STAR Line and the Southeast Service, still would be paying a substantially smaller share of RTA taxes relative to their population and system use even after SB 572 goes into effect:

Population Shares
Chicago - 34%
Suburban Cook - 29.4%
Collar Counties - 36.6%

Share of RTA Taxes After SB 572
Chicago - 32.9%
Suburban Cook - 57.3%
Collar Counties - 9.8%

Share of Transit Trips
Chicago - 66.5%
Suburban Cook - 19.7%
Collar Counties - 13.9%

Share of Passenger Miles
Chicago - 41.6%
Suburban Cook -- 27.9%
Collar Counties -- 30.5%

If anything, rather than complaints of a "CTA bailout," it should be the suburban Cook County political representatives excoriating their collar county suburban brethren for failing to pay their fair share of the expense of our regional public transit system. This is especially so since much of Metra's capital investment--e.g., extension of UP West Line to Elburn, new Southwest service, and four new start projects--are focused on improving service to the collar counties and will be expensive to operate once built.

In sum, nothing in this data suggests that SB 572 marks an significant change in the current service board funding shares. As Krol notes in his article, the "CTA has more riders and more infrastructure" than Metra or Pace. Under the plan CTA will get roughly 60 percent of the new revenue. This percentage is consistent with the operating subsidy share the CTA gets today, which, as Krol observes, is a percentage the suburbs "have been cool with."

So, no thanks to U.S. Representatives Kirk and Bean and their General Assembly fellow travelers for stirring up this "suburbs bail out CTA" pot when the collar counties (but certainly not suburban Cook County), appear to be getting a swell deal even if SB 572 passes.

9 comments:

Anonymous said...

And 5th, everybody's calculations including yours assume that the geographic/political location of the sales tax collected is the same as the origin of sales tax payer/purchaser.

Wrong.

Anonymous said...

8:40, especially with Aldermen such as Joe Moore encouraging development over the city line with the big box ordinance proposals.

However, in any event, it appears that suburban Cook County will get the shaft, taxwise, without the accompanying reforms.

Moderator said...

Anonymous #1--Just because we do the calculations doesn't mean we buy into the assumptions that drive the numbers. But your point is well taken--the six counties should be in this together with a single tax rate.

Anonymous #2--Do you think that big box developments are a form of transit-oriented development that are likely to generate lots of transit trips? If the Clybourn corridor is any indication you may need to rethink that assumption. I read recently a quote from a retail expert who said the Clybourn corridor is the second most important retail district in Chicago after north Michigan Avenue. Yet, there is no bus service down Clybourn, the purported main street.

I do agree with you that Cook County appears to be shouldering an outsized share of the RTA tax burden. I know there have been many snarky comments about the RTA governance proposal that gives the Cook County Chairman, currently Todd Stroger, the power to appoint one RTA board and one Metra board member. However, it certainly looks like the suburban Cook County members of the RTA board have done little to address--or redress--the relatively heavy suburban Cook County tax burden.

A final note: If much of the suburban Cook County tax revenue comes from shopping centers that serve the entire region is it fair to say that suburban Cook County residents are shouldering a disproportionate share of the RTA tax burden? Is anyone aware of data showing how much sales tax revenue in each of the three taxing areas comes from resident of those areas and how much comes from shoppers who resident elsewhere?

Anonymous said...

Go to www.rtams.org for sales tax collections by municipality. Very informative indeed.

Anonymous said...

4:52, no, but they are sales tax generators, something some city politicans don't appreciate. Also, they are no more or less transit oriented whether they are on the north or south side of Howard St. or the east or west side of Cicero Ave. around 73rd. However, that sure affects the tax distribution. It also doesn't help sales tax generation in the city that while Wal-Mart might be coming back to 83rd and Stewart, with the big box ordinance at least now off the table, Home Depot isn't.

Finally, Niles and Schaumburg support community transit service, including into their big boxes (such as the Wal-Marts on Touhy and Golf in Niles and Ikea in Schaumburg). Maybe CTA should reroute the Fullerton bus back into the Brickyard, now that it has been redeveloped.

HealthyCity said...

This thread of comments is representative of EXACTLY what is wrong with the current RTA geographically-based formulas. It's gets all the policy-wonks in a frenzy trying to figure out who benefits, who pays, who's hurt, who's up, who's down. I call your suburban big box example and raise you one city retail district. on-and-on-and-on.

Transit has its economic impacts, social impacts, environmental impacts, transport impacts. To isolate this down to some function of the locale of retail sales, is ridiculous. The tax(es) need to be delinked from geography because it's an impossible chore, and complete distraction, to figure out how to implement. The problem of sales taxes (and State income taxes for that matter--the PTF funds come from the general funds) is that they have not kept up with inflation--regionally. They need to figure out how some services and internet transactions kept skipped in this system and why that tax base has been slipping.

So, in my mind, the taxes should be general and diffuse to represent economic and social value of transit, complemented by specific transport related fees earmarked towards transit, namely parking fees, gas taxes, tolls and vehicle registrations. That overall pot of money needs to grow at a rate that reflects the overall size of the economy and population and transportation needs, which, maybe the rate of inflation, maybe a bit more (that's where the debate should be). Whatever the pot is, it needs to at least be sustainable, else, it's just another deferred problem years on down.

As far as how the money gets divided up, that should be based on which Service Board or private transit provider, for that matter, can increase transit useage the most, which can promote more sustainable land-use development, which helps those that are disadvantaged, which provides more transport choices to more people, which provides cleaner air, which is more efficient, which doesn't waste money, and yes, which doesn't promote patronage, which has good project oversight and balanced budgets and one whose service quality doesn't suck.

Who will do that? Yes, a regional agency with unelected technocrats running the day-to-day, BUT, an elected regional Board that can push-n-direct that agency towards publically-declared goals.

Now, that's reform.

Anonymous said...

A great post by healthycity. I agree that all of this talk about who gets what is indicative of the provincial attitude of our metropolitan leadership. In the end, it seems that this bill is nothing more than a grab-bag of pork projects for the region. Given this, its obvious that political leaders would be most concerned with the allocation of these resources rather than with the overall goal or vision of what these resources represent.

Our public transportation system can only be successful if it is prioritized. We would have to incentivize its use by allocating resources to areas where higher-density, transit-oriented development is encouraged, and raise the cost of auto-centric development and transportation. This necessarily means that some areas within our region will bear a disproportionate cost.

I don't think there are many leaders. or citizens for that matter, who see it this way. To the majority, public transportation is like an item on a grocery list: not something fundamental to our vision for this region but rather just another thing you would like to have if possible.

How come the Tollway Authority is not in the same predicament as the RTA? Why aren't there doomsday calls to shut down I355 or to close the Hillside Junction? Its because our region has prioritized highways by building a network of suburban-style development around them, thus facilitating thier use as connections between these areas. But this prioritization excludes a viable public transportation system.

So what's our priority? Is it more sprawl or is it more density and transit-oriented development? This answer to this question is the key to effective reform.

Anonymous said...

4:42

What about your Auditor Generals report?

Anonymous said...

"How come the Tollway Authority is not in the same predicament as the RTA? Why aren't there doomsday calls to shut down I355 or to close the Hillside Junction?"

It is because they were able to double the tolls for all except automobile I Pass users (and more than double them for trucks). I don't see the advocates for doubling transit fares (of course, that would be a self-destructive policy).