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Is it possible for the CTA to operate without a loss, no taxpayer subsidy required?

Dennis Byrne 28 November 2007 No Comment

That question is asked and answered in the affirmative by the Illinois Policy Institute, a free-market think tank, in its thought-provoking new analysis: “CTA looking in all the wrong places: Sustainable solution requires new thinking and real reforms.”

I can’t remember anyone seriously and convincingly making such a claim since the early 1970s when, as the Chicago Daily News urban affairs reporter, I started covering the CTA. That’s when it became conventional political wisdom that mass transit should be considered to be a public utility requiring a public subsidy. Hell, I even bought it.

Except for this: How many public utilities (e.g., the electric and gas companies) operate like the CTA, with their consumers paying only about half the costs, while taxpayers pick up the other half? After more than three decades of shoveling money at mass transit, without success or surcease, and as state politicians flop around like dying fish trying to figure out a way to sling even more money at transit, the Illinois Public Policy Institute has done a great service by re-opening an old debate.

If the institute is correct, then perhaps the powers that be can be convinced to turn over the operation and maintenance of the perpetually deficit-ridden and service deprived agency to private operators, and get us out from under this unremitting nonsense. Fat chance, though, of the pols giving up their CTA cow for milking rich contracts and jobs. But let’s look how it might work anyhow:

The last time the CTA operated without a public subsidy was at the beginning of the 1970s when, surprisingly, it was more productive. I say surprisingly, because in those three-plus decades, the public has been led to believe that the CTA has cut its budget to the bone, eliminating unnecessary jobs, cutting underused bus routes, slashing administrative costs, and so forth.

In terms of absolute dollars, you could legitimately make the argument that the CTA has, indeed, cut expenses. From 1979 to 2007, the CTA cut operating spending 8 percent, to $1.083 billion from $1.177 billion. (All figures here are in constant 2007 dollars.) But a closer look reveals something different, and important.

The number of riders has dropped dramatically, to 494 million in 2007 from 703 million in 1979. The impact of this drop shows up starkly when using passenger revenue per mile as a measure of productivity. In 1979, CTA trains carried 3.09 passengers per mile, compared with 2.84 in 2007. Bus riders per mile dropped to 4.23 from 6.61. In other words, the CTA has fewer passengers now for every mile a bus or train travels than it did 30 years ago.

Why is that? The conventional wisdom blames “fare increases” for driving away riders, yet a closer looks reveals something deeper. While riders have been hit by (a few) fare increases, the data indicate (when inflation and other factors are considered) that CTA riding has become a better bargain. “The CTA customer in 1969/1970 paid 35 percent more in real purchasing power for his or her ride than does a 2007 rider—and there were 23 percent more riders then [1969/1970] even with the higher cost per ride,” the analysis said. Put another way, ridership has declined even as it has become a better deal for the rider. If fares were increased to the impact that they had on the riders in 1969/1970 and productivity returned to the 1969/1970 levels, the CTA would save $316 million, more than enough to offset the current deficit.

What kind of productivity gains? Here’s a jarring one: Even though ridership declined from 1969 to 2007, spending per rider increased 41 percent (inflation adjusted). Again, we need to go deeper into the numbers to find out why, and the culprit is an inefficient bus system. While ridership is down 45 percent since 1979, total miles driven per year are down only 14 percent, to 71.9 million from 83.5 million. Significantly, during that period, the total route miles covered as show on the route map has more than doubled, to 2,529 from 1,042.

In effect, 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. Route miles are up 143 percent, and the number of bus routes has increased to 154 from 134. Yet today, with route miles up 143 percent, it appears the CTA is running too many route miles for too few riders,” and that adds up to an inefficient system.

With this background, it is easier to understand why, with fewer employees now (10,907 versus 12,500), the system has become less productive. Here’s why: Spending per rider is up 41 percent since 1969 and 31 percent since 1979. (Remember: More bus miles, fewer riders.) Or looked at another way: each employee now “carries” fewer riders than in 1979 (45,292 now, versus 56,299 in 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,” the analysis said.

Unlike Gov. Rod Blagojevich and others who yammer on about a “solution” to the CTA’s problems when in reality they’re abusing the word by applying it to the worst imaginable steps (shifting around money in different accounts to make it look like the state has enough to bail out Chicago regional transit), the institute offers real solutions:

• Cap operational spending at $1.67 per rider in three years and $1.55 in five years.

• Raise fares to reflect real after-inflation costs, generating $267 million immediately.

• Create a customer-centric focus, with an independent panel to measure rider satisfaction as part of any bailout.

• Halt expansion projects; they’re cutting into maintenance.

• Institute real competitive bidding. While the average transit agency tenders 40 percent to competitive bidding, the CTA tenders a measly 2.8 percent.

• Require real transparency so the public can examine every check written and every consultant hired.

• Recruit a top logistics expert from the likes of FedEx to confront the CTA’s core problem—the bus system.

• Critically examine material procurement and management procedures. The cost of materials has risen 30 percent on a fleet of roughly the same size, while maintenance, as a percent of spending, has declined about 47 percent.

• Administration and security did not exist as financial categories in 1979. Special expertise should examine how those functions were handled then and now.

• Create an independent audit commission to examine all aspects of CTA spending.

If the CTA were forced to take these measure, and if the agency was “operated like a business,” the public subsidy for its operation could be reduce to zero, according to the analysis. This scenario is based on a realistic fare that would generate $825 million and logistics and productivity improvements that would reduce expenses by $318 million.

Then, perhaps, the CTA might be marketable, as was the Chicago Skyway, and Midway Airport, which the city wants to privatize.

And—who knows?—maybe the riders would get what they want, need and pay for: A mass transit system that works.

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