More Money For The CTA: Hold On Says IPI Study

From reading his column I have always imagined that Dennis Byrne, the Chicago Tribune columnist, channels the spirits of Lenora Helmsley and George Wallace. Yet, Byrne's column in today's Tribune lambasting the Chicago Transit Authority does us a real service by pointing us to a new analysis of CTA spending and operations by the Illinois Policy Institute.

We have recently compared the CTA's bus system's performance to the performance of Pace's bus system and found that Pace's system appeared to be more cost effective on every measure examined except public subsidy per passenger. The IPI analysis compares the CTA's performance today to its past performance. Here are some of the key findings:

• Rail ridership is up 25%, from 152 million to 190 million since 1979.

• Bus ridership has plummeted by 45%, from 552 million to 304 million since 1979 and overall ridership is down 23% since 1969/70. Bus operations are a key area ripe for improvement.

• The average CTA employee today is less productive than the average CTA employee in 1969 or even 1979. This is illustrated in a number of ways. Spending (cost) per rider is up 41% from $1.55 to $2.19 since 1969/70 and up 31% (from $1.67) since 1979. Correspondingly, riders per employee are down, from 56,299 per employee to 45,292 since 1979. The bottom line is that today’s CTA spends more to deliver a rider and each employee delivers fewer per year on average. This is a root cause of the CTA financial crisis and most of it rests within the bus operations.

• By achieving the 1979 spending benchmark alone ($1.67 per rider), the CTA would save $257 million and more than close the funding gap without having to ask the taxpayers for more.

• By achieving the 1969/70 spending benchmark ($1.55 per rider), the CTA would save $316 million per year.

• The CTA is earning more system (non-subsidized) revenue per rider today than it was in 1979, $1.13 versus $.88, an increase of 28% and certainly a step in the right direction.

• Advertising and concession revenue are up 478%, from $4.3 million to $25 million.

• The public subsidy per rider is up 35% since 1979, from $.79 to $1.07. The taxpayers are more than doing their part in subsidizing the CTA’s operation.

• This 35% increase in the public subsidy on a per rider basis illustrates the fallacy of the CTA public relations and budget document claims that the CTA’s pubic subsidy has not kept pace with inflation. While that fact is true in total dollars, it is a misleading fact since the key data point is the subsidy per rider. In fact, one could make the case that the subsidy is excessive by $138 million ([$1.07 - $.79] x 494 million riders for 2007).

• Bus operations are a key area for improvement. While ridership is down 45% since 1979, total miles driven per year is only down 14%, from 83.5 million to 71.9 million. Further, the total route miles covered (the aggregate miles of the route map) has more than doubled, from 1,042 route miles to 2,529 route miles in 2007. This is unsustainable and the underlying reasons for this must be addressed.

• Today the CTA runs 154 bus routes versus 134 in 1979, an increase in routes and corresponding expense of 15% while ridership fell 45%.

• The bus operations data indicate that in 1979 the CTA operated a tightly focused, more market sensitive route map with more traffic per bus per route operated and bus run made. Today, with the route miles up 143%, it appears the CTA is running too many route miles for too few riders, making the bus system inefficient.

The IPI then makes a series of recommendations that it claims can save the CTA more than the $158 million deficit it faces in 2008.

IPI's short and cogent analysis is well worth a read. It challenges the conventional wisdom that a series of unfortunate events has overwhelmed the CTA, Metra and Pace, necessitating greater public subsidies. Instead, the analysis suggests that the bailouts past and present have allowed the CTA to avoid taking the steps necessary to prudently manage its business.

CTA Cost Structure: Background

The previous post outlined how the Chicago Transit Authority's bus operations appears to be significantly less cost-effective than Pace's bus operations in terms of the cost of putting vehicles on the streets (because of its higher ridership the CTA does better on a per passenger cost basis).

This extensively researched article by Stacy Warden in Chi-Town Daily News outlines how the CTA's high pension costs and wages contribute to its overall high cost structure and the series of events that resulted in the CTA's unmanageable pension costs. This article briefly outlines the five year labor agreement that is embedded in SB 572 and attempts to address pension costs.

Pace Laps The CTA On Cost Effectiveness Of Bus Operations: Implications For Transit Funding Crisis

A recent post indicated that Pace's financial situation is more dire than the Chicago Transit Authority's financial situation according to some basic measures such as unfunded operating deficit as percentage of revenue.

There is another side to the Pace story, however, and that is the relative cost effectiveness of its bus service. According to the Federal Transit Administration's National Transit Database 2006 reports for Pace and the CTA the "service efficiency" figures covering Pace and CTA bus service are as follows:

Operating Expense Per Vehicle Revenue Mile
Pace: $6.37
CTA: $12.50

CTA 96.2% higher

Operating Expense Per Vehicle Revenue Hour
Pace: $89.28
CTA: $123.17

CTA 40% higher

Operating Expenses Per Passenger Mile
Pace: $0.58
CTA: $1.11

CTA 91.4% higher

Operating Expenses Per Unlinked Passenger Trip
Pace: $3.87
CTA: $2.77

Pace 39.7% higher

Unlinked Passenger Trips Per Vehicle Revenue Mile
Pace: 1.65
CTA: 4.51

CTA 173.3% higher

Unlinked Passenger Trips Per Vehicle Revenue Hour
Pace: 23.07
CTA: 44.39

CTA 92.4% higher

Ignoring for a moment the costs associated with putting a bus on the street, CTA bus service is more effective than Pace's bus service because CTA buses carry more passengers per hour of operation and mile traveled. The greater number of CTA bus passengers per vehicle hour and per bus trip means that the CTA's operating expense per passenger ($2.77) is less than Pace's operating expense per passenger ($3.87).

Pace, however, is much more cost effective than the CTA in putting buses on the street. Its operating expense per vehicle mile and per passenger mile are only slightly more than half of the CTA's operating expense according to these measures. The CTA's operating expense per vehicle revenue hour is 40 percent higher than Pace's.

These results might be skewed in Pace's favor for at least two reasons. First, Pace's operating environment--suburban streets and highways--and lighter passenger loads result in fewer stops and starts that eat up fuel and equipment. Second, the CTA's bus fleet is older than Pace's bus fleet, so the CTA incurs higher repair costs because of the greater frequency of mechanical breakdowns.

So let's assume that Pace's bus service is 19.1 percent more cost effective than the CTA's bus service in terms of putting buses on the street. This 19.1 percent figure is conservative, representing less than half the lowest cost-effectiveness advantage that the FTA data shows that Pace has over the CTA.

Now apply this 19.1 percent cost savings figure to the 2006 operating expense for CTA bus service that the CTA reported to the FTA ($828,100,714). That yields $158.2 million, the very amount of the CTA's projected FY 2008 unfunded operating deficit that is behind the push to pass SB 572 and the many months of machinations connected therewith. In other words, if the CTA's bus service were as cost effective as Pace's bus service it appears there would be no unfunded CTA operating deficit.

Those opposing SB 572 might focus on finding a way to apply Pace's cost structure for its bus operations to the CTA's bus operations. Those supporting SB 572 might reflect on how the relative cost ineffectiveness of CTA bus operations compared to another public transit agency providing bus service in same metropolitan area dampens the appetite for a sales tax increase, and modify their legislative strategy accordingly.

Pace has already taken on ADA paratransit operations for the six-county region that makes up the Regional Transportation Authority's service area. Is there a way for that to happen for mainline bus service while preserving Pace's lower cost structure?

Sheriff Wyatt Yawp Rides High In Kane County

The Daily Herald reported the recent comments of Kane County Board member Bill Wyatt. According to the report, Wyatt "railed" on the Chicago Transit Authority as a "brother that you can't control" at the expense of its suburban siblings Metra and Pace.

Wyatt went on to say: "'People in the suburbs, in my opinion, need to know that Pace is not the problem. Metra is not the problem. The problem's in the city of Chicago,'" Wyatt, an Aurora Republican, said at Tuesday's Kane County Board meeting."

Wyatt's assessment that "Pace is not the problem" doesn't bear scrutiny. By any measure except raw dollars, Pace is in a much deeper in the financial hole than the CTA:

CTA
Unfunded 2008 Deficit: $158,000,000
2007 Expenses $1,079,052,000
2007 Revenue: $541,800,000
2007 Ridership: 493,600,000

Unfunded deficit as a percentage of expenses: 14.6%
Unfunded deficit as a percentage of revenue: 29.2%
Per trip unfunded deficit: $0.32

Pace
Unfunded 2008 Deficit: $32,900,000
2007 Expenses: $164,757,000
2007 Revenue: $56,435,000
2007 Ridership: 38,900,000

Unfunded deficit as a percentage of expenses: 20.0%
Unfunded deficit as a percentage of revenue: 58.3%
Per trip unfunded deficit: $0.85

In other words, Pace's unfunded 2008 deficit is much larger than the CTA's unfunded deficit when measured as a percentage of operating expense or revenue or on a per trip basis.

By way of comparison, if the CTA's unfunded deficit percentages were the same as Pace's unfunded deficit percentages then the CTA's unfunded operating deficit would range from $215,474,000 (% of revenue measure) to $417,466,000 (unfunded deficit per ride measure.)

Note that Pace's funded operating deficit is higher on a percentage basis than the CTA's funded operating deficit as well. Pace is only required to generate about 40 percent of its revenue from its operations while the CTA (like Metra) has to generate over 50 percent of its revenue from operations. In other words, big brother CTA and little sibling Metra are subsidizing Pace even in the best of times.

Wyatt's comments came at a Kane County Board meeting attended by Metra and Pace representatives, but apparently not the CTA. There is no indication from the report that the Metra or Pace representatives stood up for their CTA "sibling" in the face of Wyatt's verbal onslaught.

Wyatt's apparently unchallenged statements are yet another reason why the RTA (but not CMAP) should be scaled back to possibly two counties (Cook, DuPage) and no more than four counties (add Lake and Will) that have the interest and political will to support a regional transportation system. Once cut loose from the RTA, Kane, McHenry and perhaps other counties could contract with the RTA for service (e.g., Metra service to Elburn) and/or put together self-made and self-funded transit systems on their own. In a time of financial distress, why shouldn't the RTA be scaled back to its core service area, sparing it the potshots and endless yawping from knuckleheads in Kane and McHenry Counties.

CTA Doomsday Clock Reset

January 20, 2008.

Tick, tock. . . .

Post-Doomsday: Will The Equity Questions Reemerge?

The Metropolitan Planning Council is alerting public-spirited folks with time on their hands next Monday to attend the following:

Chicago Transit Authority Press Event

What: A press event to highlight the impact of the cuts and fare increases

When: Monday, Nov. 5, 11 a.m.

Where: Ogilvie Station, at Jefferson and Madison streets

This press event could be a real hoot if doomsday arrives on schedule. CTA management and its customers will be reeling from their first work day post-doomsday. They will be camped outside Ogilvie Station, from which puzzled Metra commuters will emerge wondering what the fuss is all about. After all, unlike Pace and the CTA, Metra is neither cutting service nor raising fares in this first doomsday. As for the second doomsday in January, when the CTA will truly gut its bus system and Pace becomes a shadow of its former self, Metra will raise its fares all of 10 percent and increase its unlimited ride weekend ticket from $5 to--you better sit down--$7.

The juxtaposition of the CTA folks standing in the street outside a Metra station highlighting the impact of the cuts and fare increases that affect everyone but Metra and its customers is striking. Maybe, just maybe, at this press event someone in attendance will raise the question, where is the fairness in that only two of the three service boards have to go through the first doomsday? Who was responsible for the financial oversight of the region's public transit system and how did they allow doomsday to fall so unevenly on the service boards? How is it that the service board with the most prosperous ridership base was spared the first doomsday round of service cuts and fare increases while the service boards serving the most transit-dependent populations must feel the pain? And when one looks at the racial composition of the customers served by the three service boards, which racial groups are bearing the brunt of the first doomsday cuts and fare increases and which are not?

Both the Moving Beyond Congestion effort and the SB 572 process were designed to steer clear of these kinds of questions. If they fail and doomsday does descend on two of three service boards, then maybe it is time to start asking those equity/justice questions.

Local 241: Inside Track Or Taken For A Ride?

As we get closer to the first transit doomsday the rhetoric is heating up. The Mayor of Chicago tells Springfield that it is do-or-die time and to get its act together, but adds not a dime to Chicago's $3 million annual contribution to the Chicago Transit Authority's operating budget, which has not changed for almost 25 years. The CTA lines up 39 buses representing each of the bus routes that will be cut in the first doomsday. The Senate Minority leader, Frank Watson, sends a letter urging fare hikes. Federal legislators warn that the CTA's troubles may keep Chicago from ascending to the Olympian heights. The looming doomsday finally prompts a spirited public hearing at Lane Tech High School.

What may be most interesting, however, is yesterday's U-turn by the Amalgamated Transit Union, Local 241. Local 241 represents the CTA's bus drivers and will lose approximately 600 members if the cuts go through. Like the CTA's other unions, Local 241 has agreed to significant concessions as part of the SB 572 process.

According to reports (here and here) Local 241 was preparing a press conference to roll out a plan to file a lawsuit and take other aggressive action intended to forestall doomsday. At the last minute, Local 241 dropped these plans. Its spokesperson cited promises from legislative leaders that the transit funding problems would be fixed in time to avert doomsday.

Here is Channel 2's take:

by the time their 1 p.m. news conference finally got going at nearly 3:30, union officials had backed way off because, they said, of promises from key legislative leaders.

"The legislature will take action and will be responsible and not allow one of the largest mass transit systems become paralyzed," Melvin Caldwell, ATU Local Union 241, said.

No details were offered either by the union or state politicians. For his part, Mayor Richard M. Daley expressed sympathy with the angry bus drivers, noting that they had recently ratified a new contract that provides no immediate pay raise and makes long-term concessions on the cost of health care and pensions.

"They've done their part. Sure they're upset. This is ridiculous. Now, this is the week that adults in Springfield have to do their job," Daley said.

A spokesman for House Speaker Mike Madigan says he's not aware of any breakthrough.

Does Local 241 have an inside track to a transit funding solution, or has it been taken for a ride?

More Schwieterman On CTA Value Pricing

Professor Joseph Schwieterman graciously submitted a lengthy response to my recent post discussing his Chicago Tribune commentary advocating that the CTA adopt value pricing. In view of the importance of the issue and the thoroughness of the comment, I've reprinted his comment here:

The central message of my Chicago Tribune article is that the CTA has not, despite its rapidly deteriorating financial condition, pursued opportunities to improve its revenues through “value-based” pricing.

You are correct that no major big-city transit system in the U.S. has made the conversion from a flat-fare system to a distance-based system. However, I am unwilling to let the CTA off the hook so easily for its relatively primitive pricing practices. Outside the U.S., nearly all major systems have made the conversion to more sophisticated pricing structures, and as I explain below, other agencies in the U.S. have been more vigorous in pursuing “value-pricing” options than the CTA.

Of course, the CTA’s options for adopting value-based or distance-based pricing are now greatly constrained due to its decision to invest in the present farecard/turnstile system. This huge investment was made in 1997 without, to my knowledge, a serious evaluation of its entire fare system. I have spoken to numerous people, including some transit insiders, who share my view that this was a major mistake.

The recent actions of New York, however, suggest that the CTA still has many viable options. The MTA has a large system of express buses in which prices are set at $5; it also charges a hefty price ($5) for passengers riding its “Air Train” to JFK. Last week, the agency unveiled a proposal to adopt peak/off-peak pricing for the entire system, touting it as an effective way to both raise revenue and smooth out traffic patterns (see link below).

http://www.nytimes.com/2007/09/25/nyregion/25fare.html?ref=todayspaper

The board will apparently vote on this proposal sometime this fall. Why aren’t we seeing a comparable debate in Chicago?

In Los Angeles, the local transit provider (LACMTA) charges a premium of up to $1.20 for bus routes that use local expressways. A study by Matt Smith, a researcher assistant at UIC, shows that many systems around the country have adopted some form of value-based or distance-based pricing. Although I’m not familiar with the measurement criteria that Smith uses, he offers an interesting discussion about the benefits of value pricing that can be accessed via the link below. There is table (pg 16) comparing the status of various pricing strategies in U.S. cities that helps illustrate my point.

http://cta21.utc.uic.edu/Presentations/TransportChicago07/Matt%20Smith.pdf

As the CTA sinks into deeper financial trouble, it is frustrating to me that we are not having a serious debate about creative ways to improve its revenue, outside of draconian “doomsday” budgets. The CTA has far more pricing power than most other transit agencies due to the size and strength of Chicago’s central business district. Plus, we face significant congestion on certain rapid-transit lines at the height of rush hour, which makes providing additional capacity costly.

Value-based pricing is less viable in cities with a smaller rapid transit system, where the price elasticity of demand is higher (partially due to the lower price of downtown parking) and congestion is less severe on trains and buses at peak times. (I did not mention Pace Suburban Bus in my article since I do not believe the agency, with its present route system, has much pricing power.)

This blog raises an excellent point that, even if the infrastructure issues associated with distance-based fares (including the need to install turnstiles that read farecards when passenger exit stations) could be resolved, Chicago’s economic geography makes this type of pricing politically and socially complicated. Some of the poorest neighborhoods, such as Austin and Englewood, are a considerable distance from downtown, which makes the distributional consequences of distance-based fares more than a trivial concern. The economic geography is less problematic in Washington, D.C. or San Francisco, where the poor tend to be concentrated in close-in neighborhoods.

However, the stations that are the farthest out from the city on the CTA “L” system, including O’Hare Airport/River Road, Evanston, and Oak Park/Forest Park, could easily support high fares. (It is my understanding that years ago the CTA dropped its surcharges on several routes, including the Evanston Express, for political rather than economic reasons.) Express bus routes using Lake Shore Drive are also good candidates for higher fares, while short routes in the downtown should probably have lower fares.

It is not clear whether it would be cost-effective for the CTA to modify the present farecard/turnstile system (presumably by installing the previously-discussed exit farecard equipment) at certain stations, such as O’Hare, to allow it to impose higher prices. However, this would be the simplest way to make the fare system more rational. Passenger exiting at these stations would pay a surcharge; those starting their journey at these stations would pay both the basic fare and the surcharge all at once.

Alternatively, the CTA could simply still charge premium prices only for originating passengers at certain stations (while allowing arriving passengers to pay only the basic fare), which would obviate the need for installing new turnstile equipment. I agree that this approach is imperfect, but it would be administratively simple and easy for travelers to understand. (Some highways have different tolls based on the direction of travel).

Moreover, the Chicago Card, introduced in 2000, provides an excellent opportunity for building greater pricing flexibility into the system and could help alleviate the pain of collecting surcharges if the CTA were to reinstitute the practice of collect surcharges on certain routes, such as the Evanston Express (Purple Line) times.

It is true to that value-pricing would result in some travelers either opting for other modes of transportation or traveling less. The assumption behind value-based pricing, however, is that the benefits, in the form of increased financial solvency of the transit provider and less severe “peaking” of demand, exceed the social costs.

It will take a lot of political will for the CTA to adopt value-based pricing in a large-scale way. When evaluating the actions of other cities, I was struck by the propensity for some cities to build new light-rail routes with flat-rate fares. Los Angeles has built an entire light-rail system around a flat-fare system. The cost of riding the Los Angeles-Long Beach Blue Line, which stretches 22 miles, is just $1.25. (It is not surprising that its farebox recovery ratio is so poor!). This seem absurd to me, considering the relative ease of zone-based and time-of-day-based pricing on these systems, which can rely on the “honor system” (with enforcement).

The new light-rail system in Minneapolis has both distance-based and time-of-day based pricing, making it a prototype for other to emulate.

None of this is intended to suggest that distance-based or value-based pricing would be a quick fix. It would probably increase revenues only modestly until a general retrofit of station equipments becomes possible, which is hard to imagine right now. Adopting it system wide would be a long, difficult road. But incremental steps could pay dividends, and give us hope that the CTA is waking up to the need for run itself more like a business.