RTA Innocent Victim in William Coulson's "Transit Follies" Piece

William Coulson, a Chicago lawyer who joined the board of the Regional Transportation Authority earlier this year, has posted an article entitled "Transit Follies in Chicago" on the blog of Mass Transit magazine. It is generally rare for senior public officials like Coulson to get off the reservation established by their institution's PR team. This piece, however, reads like it may have been authored by Coulson.

The article is Coulson's historical perspective on the current transit funding situation in the RTA's service area in northeastern Illinois. In the piece he portrays the RTA and the service boards--Chicago Transit Authority, Metra and Pace--as innocent victims of bitter political infighting by politicians unable to put together a deal.

This kind of revisionist history is disappointing from an RTA board member who has signaled at least a bit of an independent streak. It also suggests that the RTA continues to be unwilling to acknowledge its role in causing the current transit funding crisis. The RTA's unwillingness to acknowledge partial responsibility for this crisis no doubt makes it a less sympathetic candidate for additional public funding.

Coulson begins by stating that "the RTA and the service boards have been warning Illinois political leaders for years that the system was seriously underfunded and heading for a serious breakdown." Actually, until the Moving Beyond Congestion effort by the current RTA administration the RTA resisted efforts to bring transit funding challenges to the attention of the Governor and the General Assembly. There was significant inter-agency discord when the CTA attempted to do so on its own.

Coulson thus ignores two major RTA failures. First, the RTA's equivocation about whether there was a transit funding problem and its resistance to going to Springfield for a fix meant that the General Assembly and the Governor now are stuck with a major "crisis" to fix. Second, despite statutory requirements that the RTA only approve service board budgets that are balanced and reasonable, the Auditor General found that the RTA had allowed the service boards to expand their service levels beyond what they could afford for at least the past five years.

A year ago, the service boards thus faced major operating deficits going into 2007. Rather than press them to make the service cuts, increase fares and/or extract labor concession at that time, as it was required to do, the RTA made a third major mistake. It approved service board budgets that were balanced only by using a plug number for substantial hoped-for additional state funding. Here is Coulson's take on that decision:

Thus, there is no dispute that the financial crisis is real and that there is a long-term plan to significantly improve the system. Enter Illinois’ unique brand of politics.

The RTA is financed largely through fares, a sales tax imposed in the six counties and a state match of 25 percent of the sales taxes raised. So optimistic was the RTA board in December of 2006 that the 2007 budgets included as projected revenue more than $200 million in what was called “New Transit Funding.”

Coulson was not on the RTA board in December 2006 and neither was I. Nonetheless, if the RTA had had some reasonable basis back then for its optimism it has yet to reveal what it was. No bill increasing transit funding had been introduced at that point. The Auditor General had not yet released its audit report. No prominent political figure had publicly expressed support for a tax increase necessary to provide the RTA with more money. The RTA was like the kid hoping for an allowance increase based on a parental statement that "we will take care of that later."

While I'm not an expert in GAAP accounting, I very much doubt that optimism over increased revenue from the timely passage of a bill increasing taxes that has yet to be introduced in the legislature or be publicly supported by any significant political figure has the necessary certainty to count as revenue. Yet, that is what the RTA did when it approved the 2007 service board budgets.

After glossing over these compounding errors, which will mean that doomsday if it ever comes will be even tougher on transit users, Coulson goes on to summarize the back and forth over the various transit bailout bills and the rancor that exists among the political leaders. He ends his piece with a bit of bravado:

What to make of it all? I have tremendous respect for the elected public officials who face the daunting task of balancing the state budget in the face of competing demands from constituents. They will have to decide ultimately how important mass transit is to the well-being and economic vitality of Illinois. And the people — who elect them — will have the final word on all this.

As an appointed board member of the RTA, I share the responsibility to provide the best transit to the people of the six-county region that the allotted financial resources will responsibly permit. If our elected leaders want a second-rate system, that is what they will get.

What is missing from Coulson's piece is any acknowledgement that in recent years the RTA failed its "responsibility to provide the best transit to the people of the six-county region that the alloted financial resources will responsibly permit." The RTA let the service boards expand service beyond their financial means and then plopped the resulting crisis into the lap of the General Assembly and Governor.

How refreshing it would have been if Coulson had said something like "the RTA made serious errors, but we have learned from those errors and with the money and increased authority you give us we will provide the best system within the financial means you provide." RTA acceptance of its share of the responsibility for the current crisis certainly would go down better than yet another threat about a "second-rate system" from an key member of a financial oversight agency that failed to do its job.

RTA Gamble--RTA Consequences?

In his "Getting Around" column in today's Chicago Tribune Jon Hilkevitch looks ahead to the 2008 doomsday scenario that the CTA will unveil on Wednesday. To set the stage for how the region got to this point, Hilkevitch looks back at the budget the RTA Board almost a year ago:

Early this year, RTA officials ordered the CTA, Metra and Pace to pass 2007 budgets based on the risky assumption that the state would approve $226 million in new operating subsidies for transit. It was a questionable move at the time by the RTA, which is responsible for providing financial oversight.

Today, the RTA's gamble looks much, much worse. Relatively mild service cuts and fare hikes that would have taken place earlier this year to balance transit agency budgets -- if indeed such measures were really necessary to convince state lawmakers of the pending transit meltdown -- will pale in comparison to what may lie ahead.

This "gamble" by the RTA Board was not only risky, it likely was in violation of the RTA Act, which requires the RTA to approve only balanced budgets based on reasonable and prudent assumptions. As noted previously (here and here), section 4.11(b)(2) provides in relevant part that the RTA Board:

shall approve the budget and plan if:
. . .

(ii) such budget and plan show a balance between (A) anticipated revenues from all sources including operating subsidies and (B) the costs of providing the services specified and of funding any operating deficits or encumbrances incurred in prior periods, including provision for payment when due of principal and interest on outstanding indebtedness;
. . .

(v) such budget and plan are based upon and employ assumptions and projections which are reasonable and prudent;

(vi) such budget and plan have been prepared in accordance with sound financial practices as determined by the Board.

The RTA Board failed to follow these statutory requirements when it approved a budget with a $226 million plug number for operating subsidies to come from some undetermined State source(s). The RTA gambled that the State would come through with that money and, as Hilkevitch notes, that gamble makes each doomsday scenario worse than its preceding scenario.

(Perhaps someone should submit a FOIA request to the RTA seeking something like "all documents that refer to or relate to the $226 million in additional state funding that is contained in the RTA's 2007 budget, including but not limited to any communications with the Governor or any legislators, or representatives thereof, concerning increased State funding for public transit in the six-county RTA region in 2007." Faced with ever more dire doomsday scenarios, the public deserves to know on what basis--if any--the RTA Board voted to approve its 2007 budget with a sizable uncovered operating deficit.)

Rather than base its budget on a large plug number, the RTA should have fulfilled its fiscal oversight responsibility by prompting the service boards to begin in January 2007 making service cuts, implementing fare increases, and taking other steps necessary for they and the RTA to live within their means. These actions may have prompted a quick resolution of the transit funding situation or by now we would have learned to live with a scaled down transit system. Either way, the RTA would have complied with its statutory responsibilities.

Supporters of increases in public transit funding (e.g., Richard F. Harnish's well done commentary) make much of the fact that the CTA and the other service boards are attracting a growing middle class clientele and no longer should be viewed primarily as a social service provider for the poor. At the same time, the RTA presumably justifies allowing the service boards to provide roughly 10 percent more transit service than they can afford on that ground that such transit service is a vital social service. Which is it?

Even if the RTA has the noblest of intentions in allowing the service boards to continue supplying more transit service than they can afford, the RTA Act does not give the RTA Board the power to exercise financial oversight based on its good intentions. The Act is quite specific that the RTA Board is not allowed to approve budgets that contain an uncovered deficit, which is just what the RTA did here. Clearly, the legislature wanted to get Illinois out of the cycle of rolling out more transit in northeastern Illinois than the service boards could afford, with doomsday scenarios as an inevitable result.

The cuts and fare increases necessary to balance the 2007 budget would have been less severe and less painful if they had been implemented early this year. Certainly, the Auditor General's report in March 2007 finding that the service boards had expanded service levels well beyond their financial means should have galvanized the RTA into action. Instead, the RTA's delay in matching transit service to available financial resources has created the very kind of crisis that the RTA Act was designed to avoid.

When a board fails to follow the spirit if not the letter of its governing law and when its "gamble" results in the creation of the very fiscal crisis that board was charged with preventing what can be done? One option is for the board to resign, allowing for a quick change in leadership. Another option is for other powers to step in and take over via an oversight agency.

It does not appear that the RTA Board is taking any responsibility for gambling away its financial oversight duties. Nor does replacement of the Board through a a temporary oversight agency seem on the horizon.

Why not? Is there such a high degree of confidence in the RTA Board despite this gamble and other missteps and failures to exercise its current oversight powers that holding the Board accountable is unthinkable?