Tuesday, August 14, 2007

Summertime Blues

All weekend and into this week the new, improved version of SB 572, the transit funding and RTA reform package, sat on a table practically screaming "read me." It was too nice outside to do that, even tonight, when I was outside on the water in the rain. Summer is slipping away and it is important to work on our biking and walking skills. After all, come September 16th we may be needing those skills!

Ok, grit teeth. It's time to starting mining this new bill. Here are two nuggets.

Metra Bonding Authority

The bill gives Metra (but not Pace) the authority to issue bonds (pgs. 142-44). Metra can have up to $1 billion in debt outstanding and use the proceeds for a variety of purposes. Construction of a new Metra headquarters, however, is expressly barred.

A 75% supermajority of the RTA board must authorize Metra's issuance of debt. Note that the bill leaves untouched the CTA's power to issue debt without the RTA's specific authorization (70 ILCS 3605/12). Of course, as a practical matter the RTA can block the CTA's issuance of debt by rejecting the CTA operating budgets and/or capital plans that assume that the CTA will issue debt.

Metra has long sought the power to issue debt. Its dreams will come true if SB 572 is enacted. Johnsburg Ho! (Note the estimated $351 million in capital investment for the Johnsburg project will yield 4100 new riders (pg. 21 of 27.) Since Johnsburg is located in the outer reaches of this region, each new ride generated will soak up at least several dollars of operating subsidies. In essence, the region will be investing in the kind of transit ridership that will drain the most tax revenue per trip.)

RTA's Possible Role In The CTA's Pension/Healthcare Mess

SB 572 makes no substantive changes to section 28a of the CTA's authorizing statute (the Metropolitan Transit Authority Act), 70 ILCS 3605/28a, except to reflect the new supermajority requirement for RTA board approval of certain actions (from 9 votes out of 13 board members to 12 votes out of 16 members.). Section 28a(4) reads in relevant part as follows:

(4) Within 30 days of the signing of any such collective bargaining agreement, the [CTA] Board shall determine the costs of each provision of the agreement, prepare an amended budget incorporating the costs of the agreement, and present the amended budget to the Board of the Regional Transportation Authority for its approval under Section 4.11 of the Regional Transportation Act. The Board of the Regional Transportation Authority may approve the amended budget by an affirmative vote of two‑thirds of its then Directors. If the budget is not approved by the Board of the Regional Transportation Authority, the agreement may be reopened and its terms may be renegotiated. Any amended budget which may be prepared following renegotiation shall be presented to the Board of the Regional Transportation Authority for its approval in like manner.

In other words, during the same period that the CTA was entering into collective bargaining agreements that resulted in chronically underfunded pension and health care plans, the RTA may have had the power to have rejected those contracts as imprudent. This might have forced the CTA and its unions to go back to the bargaining table, giving the CTA another chance to have obtained an agreement that provided adequate funding for its pension and health care plans. At a minimum, the CTA could have used the RTA's threat of a veto of the revised budget necessary to reflect a proposed collective bargaining unit to obtain improved terms.

The CTA's recent labor agreements with its largest unions, however, were not negotiated at the bargaining table; rather, they were imposed through arbitration awards. Does anyone know if section 28a(4) applies in the event that a CTA labor agreement comes through an arbitration award rather than at the bargaining table? Did section 28a(4) play any role in the CTA labor agreements that the Auditor General found precipitated the pension and healthcare funding crises?


Anonymous said...

The $i Billion is RTA's guarantee that Metra will build big Al's obelisk in Shaumburg.

Moderator said...

To what specifically does "big Al's obelisk" refer?

Anonymous said...

$540 million would be needed just to replace the Electric District Highliners. Maybe the bonding power is designed to get that project off the ground, as south suburban politicians have complained about that for years (and some have cried racism, while others have decried the lack of potties). NICTD had to issue bonds to cover its order for comparable cars, and could not wait to "piggy back" on Metra's order. Metra also has huge capital needs in replacing overpasses on the lines it owns (primarily the RI).

Johnsburg would undoubtedly be federal New Start money, unless any bonding would be necessary in anticipation of that.

Al Larsen doesn't need a monument.

Anonymous said...

I recently heard that lawyers make thier money by dividing things. That surely seems to be the case wtih SB 572 in which transit funding is divided into new pots of all sizes, shapes and colors.


- $20 million suburban community mobility fund for Pace
- $10 million transit innovation, enhancement and coordination fund to be doled out at the discretion of the RTA
- $1 billion bonding authority for Metra
- real estate transfer tax imposed in the city of CHicago to bail out the CTA
- .25% RTA sales tax increase in the collar counties for a collar county empowerment fund.

What happened to the seamless transit system? All of these divisions can only strengthen the seams.

I also believe the counties will rue the day they took a bite out of the RTA sales tax apple. THey are likely to find themselves embroiled in all kinds of new squabbles with municipalities, the RTA, RTA service boards and advocate groups over how to use and account for the money.

Anonymous said...

Having gone to law school, I can tell you that lawyers don't make money dividing things, they make it off the contingency, or in the corporate world, trying to find a way to justify what the CEO wants. Didn't do Mark Kipnis (the local Hollinger lawyer) any good.

I agree about the new pots, but that just seems to be legislative earmarking. Since the debate started in 2004 with Frank Kruesi saying to raise the collar county sales tax to 1% and let the CTA use it to fund its deficit, the response we got is that since the whole RTA now claims that it needs money, we'll agree to some tax increases, so long as we get our share. It also seems that the current philosophy behind the real estate transfer tax is that it is for the CTA pension bonds, and since the city's operatives made that mess, its property owners can pay for it.

I'm sure that the debate over CTA getting nearly all of the 15% RTA take off the top also fueled some of the desire to create funds that are discretionary to some sense, but not to the degree that they can be diverted from the suburban taxpayers.

There may still be the question whether suburban Cook County cross subsidizes the collar counties, through the Metra formula, but I haven't heard anything about that lately. Pace must have a few political backers to get the Suburban Mobility fund.

I believe that we have debated the additional .25% county sales tax in the collar counties, and still haven't received a good answer on why the RTA is to assess that only for the purpose of turning it over to the counties.