Advice to the CTA on how to make $35 million in cuts

The RTA board today confirmed that reduced tax revenues blows another $35 million hole in the CTA's budget this year.

Rich Rodriguez.JPG

So, what should the CTA do? First and foremost, listen to and consider its customers.

Us.

And I like what I've heard so far from President Richard Rodriguez on that front:

"We have to take a look at who is going to be impacted, who is more
transit-dependent and where we can afford to basically reduce service
and not necessarily eliminate service."

Here are my suggestions for cuts:

  • First, look internally. Cut any open vacancies that may exist. Look critically at spending on consultants, travel, etc.. Every penny counts.
  • In identifying service cuts, choose the least travelled routes. Cut back on frequency. But avoid at all costs cutting entire routes. Because, hopefully, this is a short-lived problem, and the tax revenue will come back as the economy improves. If you cut entire routes now, it will be extremely difficult to get them back. Just don't do it.
  • Avoid fare hikes at all costs. And thankfully, fares don't appear to be in the picture.
  • Be judicious in deciding to transfer capital dollars to the operating fund. I'm not totally against it, I'm increasingly concerned about the impact of such decisions

What have I missed? What are your thoughts?

Comments

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  • Here's a good start.

    Dump the Real Estate leasing contract that they have.

    That should get back about $5 mil to start.

    KevinB

  • I'm very fearful of cuts affecting Evanston. The last doomsday would have eliminated most of the bus routes in Evanston.

  • In reply to reub2000:

    Yep, you know that's where they'll go first.

    Not mentioned--the two things most mentioned here that would more than take care of the problem:
    --Free rides for seniors
    --The fuel hedge.

    Compared to that, the things Kevin O lists are namby pamby.

  • In reply to jack:

    And if you are saying that the above is impossible
    --If CTA could mount a legislative campaign to increase our taxes (including Carole Brown's "bright idea" to impose the real estate transfer tax), it can campaign to repeal this misguided idea of a disgraced governor, which the legislature then claimed was forced down its collective throat.

    --As Rodriguez is a graduate of Chicago-Kent College of Law, he doesn't need legal advice from us on how to deal with the hedge. And if he can't deal with it legally, he can sure deal with CTA employees who thought it was a good idea.

  • In reply to jack:

    Jack,

    How exactly are you supposed to get out of a fuel hedge? It's a contract. And fuel hedging IS a good idea, they just happened to be on the wrong end of it this time. Obviously you had a crystal ball that told you that oil was going to go down and that they should have waited to hedge. Perhaps you should go work for the CTA and run this department.

  • In reply to jack:

    I'm sure I would be more competent.

    Rodriguez has no control over the free rides for seniors.

    But, as I said, he could mount a campaign for legislation to eliminate it. Since the legislature has to be in Springfield during the summer anyway, why not advocate it, instead of going the service cut route again? I'm betting with Reuben on this one, because it is the politically easy thing to do.

    It's a contract.
    I said I wasn't going to give him legal advice, except to say that since he is a law school graduate, he could at least read Williston on Contracts. And I also said that even if he couldn't legally get out, he should at least deal with the CTA employees who thought of hedging at the top, or in response to your crystal ball comment, those employees who continue to defend the hedge. If nothing else, CTA could close out the position in the commodity market and post the loss now, instead of paying $4.40 a gallon (it was $3.40 a gallon only a few months ago, so the price keeps going up).

    It makes no sense to say that CTA is under budget 10 cents a gallon on fuel, when CTA is millions, maybe hundreds of million below budget on the income side! Especially since the economic depression has depressed both fuel prices and sales tax receipts. But as of April 2009, the CTA CFO doesn't have the sense to figure that out.

    As far as the crystal ball, you raised the question when the hedge ends, which brings the question when did it begin? After it looked like the economy was going into the tank. Last September, Donald Trump said that the direction the economy was going, gas prices would be under $2. And guess, what, by December they were. So, if the hedge was made after then, Trump knew something that CTA and United Airlines did not. Also, Pace didn't get stuck on the hedge--apparently they have a better crystal ball or better management. Probably the latter.

    In any event, if there are obvious things losing things in the magnitude of $40 to $80 million a year, I would think attention should be put on them rather on stuff that will have a peripheral effect.

    Instead of always challenging me, how are you suggesting that the anywhere from $60-200 million shortfall in tax receipts be addressed? Apparently the RTA is not going to the raise the sales tax more route. Answer some questions instead of just asking them or defending the CTA status quo.

  • In reply to jack:

    Rodriguez has no control over the free rides for seniors.

    I would cut the #200 bus. Their last report basically said that they are getting like 15 riders per day. That's not going to cut it.

    What about if they gave workers 1 furlough day? How much would that gain them?

  • In reply to chris:

    Sorry I replied to the last, first.

    I would cut the #200 bus. They already announced a hearing to do that. Your suggestion is a day late.

    What about if they gave workers 1 furlough day? I suppose there are management people that it wouldn't harm operations to do so.

    However, unless you are advocating drastic service cuts, how do you furlough bus and train operators (it still takes one to operate each) or maintenance staff (unless maintenance gets much worse that it was)?

  • In reply to jack:

    I don't think you can furlough union workers, so it wouldn't affect them. Just back office people, etc.

    The #200 bus is not cut yet is why I said that. They are still talking about it, having a hearing, whatever...

    I certainly am not going to defend the status quo of the CTA. I think they have improved over the last 2 years, but can still do a lot better. I don't have all the answers, but I'm not pretending to.

    I don't think it is the CTA's privelege to lobby one way or another for free rides. It's not a part of their mission statement. http://www.transitchicago.com/overv.aspx and I don't think they should be doing that. I think they should very clearly state their case as to what the free rides are doing to their bottom line, but it's not their place to take sides on the issue. Their job is to get people from point A to point B in the best way possible. They are not a political lobby.

    Based on your comments about contracts and oil hedging, it sounds like you know enough to be dangerous, but don't fully understand what they are. If people were able to just back out of their hedge contracts, the futures market would INSTANTLY collapse. Hedging was not the problem. The people hedging obviously hedged incorrectly, but we wouldn't be having this discussion if gas was $8/gallon. It swings both ways. And as for taking advice from Donald Trump on gasoline prices, he was obviously right, but he's also gone bankrupt twice.

  • In reply to jack:

    Last doomsday was going to wipe out every cta route within two miles of me, leaving me with some PACE routes (that my UPASS doesn't cover, do not run late enough for me to get back, and don't go anywhere convenient for me).

    So until the new oakton station gets built (and the yellow line isn't shut down by then....) my commute would have died with those service cuts.

    I *really* hope they don't put me through that again.

  • In reply to jack:

    For, the most part, yes you can furlough Union workers if they agree in lieu of layoffs. The state has done it, the city has done it (and plans more). The CTA doesn't seem to look at this as a possible cost savings.

    Since people costs make up about 70% of most budgets, then the savings would be significant. They could also start slicing off some of those 100K plus a year management/administrative jobs, especially all the new ones created under the Huberman regime.

    KevinB

  • In reply to jack:

    I don't think it is the CTA's privelege to lobby one way or another for free rides. It's not a part of their mission statement. http://www.transitchicago.com/overv.aspx and I don't think they should be doing that.

    I also don't see in their mission statement that one of their missions was to campaign for two years for tax increases, including Frank Kruesi repeatedly saying that the bulk of them should be imposed on the suburbs. That didn't stop him from saying that, Carole Brown blogging for funding, or the CTA aiding people like those behind savechicagolandtransit.com, who were making similar arguments. (I recognize that the latter were independent people, but they still had the CTA's blessing.)

    However, the mission statement does say:

    * Results-Oriented - We will focus on getting the job done and will derive personal satisfaction from the service we provide.

    * We will accomplish this mission by
    ** Being accountable to fellow employees and customers.

    Saying "we are under budget for fuel" is not being accountable, especially not to the customers if it results in service cuts, and not to the employees if it results in job cuts.

    I'm sure you are next going to argue that the mission statement doesn't say that they have to be accountable to the taxpayers, but since 66 or so percent of their operating comes from the taxpayers (taking into account the exclusions from the statutory recovery ratio for security, pensions, etc.) and 100 percent of their capital comes from the taxpayers, they sure better be.

    And having worked in industries where one of the "team building" projects was building a mission statement, rest assured that they mean nothing. Certainly they can't be used as an excuse for inaction, especially since Huberman and Rodriguez have complained from Day One regarding the free rides. Before them, the fare per ride (based on unlinked trips) was about $1.03, now it is reported to be back to about $0.91, despite another fare increase.

    So, why you are so adverse to CTA lobbying against something that is clearly hurting it is beyond me.

  • In reply to jack:

    "So, why you are so adverse to CTA lobbying against something that is clearly hurting it is beyond me."

    I'm not adverse to it, but I don't think it should be expected of them. They don't have a vote at the end of the day, so I don't see how much good they would do anyway.

    And back to my original point... Fuel hedging and free rides for seniors are not something the CTA can make a decision on tomorrow and fix the budget. One is locked, and the other they can do nothing more than lobby against it. I'm not saying these wouldn't fix the problem, cause they would, just that the CTA doesn't have any control over these issues at this point in time.

  • In reply to chris:

    I guess my response is that the original post ended with

    "What have I missed? What are your thoughts?"

    Well my thought is that those were two things that were missed and Rodriguez should look into them. Even if they can't fix them tomorrow, they aren't going to be able to do anything else effective tomorrow, either, if that is the test. Service cuts take time to implement. If you have to go back to talk to the union, that takes time to implement. If you are going to furlough union members, there is little difference, as far as the taxpaying and riding public is concerned if necessary operating personnel is furloughed or laid off. (It makes a difference to the union members, and of course if deadweight is laid off, but we don't really expect the latter). And if you lay off workers, the WARN Act requires 60 days notice of a mass layoff. The union contract undoubtedly also requires notice.

    So, again, you have just thrown another strawman up there, just like the mission statement.

  • In reply to jack:

    I have not supplied a strawman argument. The question is what should the CTA do? The CTA can not get rid of free rides for seniors. The CTA can not back out of prior fuel hedges it already placed. I was simply pointing out your suggestions were not within the direct capabilities of the CTA. End of story. Accept it or don't.

  • In reply to chris:

    They also cannot unilaterally change union contracts nor avoid arbitration if the union demands it. So why did you suggest furloughs?

    And Rodriguez can certainly announce that CTA will lobby against free rides and announce that he will look into who is responsible for the hedges. It is also clear that while you say there are contracts, you don't have the contracts themselves. Thus, you can't say what can or can't be done, even under them, such as if they have escape clauses or requirements provisions.

    So, I don't accept it, and you certainly haven't given me any convincing reason why I should, or why those ideas can't be advanced.

  • In reply to jack:

    "It is also clear that while you say there are contracts, you don't have the contracts themselves. Thus, you can't say what can or can't be done, even under them, such as if they have escape clauses or requirements provisions."

    It is clear you do not know what futures hedging is by that statement alone. Try going down to the CME and asking a trader if they ever bought or sold a contract with an "escape clause".

  • In reply to chris:

    Let me know who ever took delivery on a CME contract. If it is a commodities contract of that kind, the CTA could close it out and take its lumps at once, as I previously suggested, instead of waiting while the price goes from $3.40 to $4.40, to gawd knows what.

    If you are so sure about what is in the CTA contract, ask Kevin O for permission to post it.

  • In reply to jack:

    BTW, diesel fuel trades on the NYMEX. Maybe it would help if you and CTA read this.

  • In reply to jack:

    Yes, theoretically they could take their lumps all at once if they had enough room to store all the diesel fuel stated in the contracts. That wouldn't really change how much they lost on this deal though.

    I'm not sure what your point is about diesel trading on NYMEX. The exchange that it trades on doesn't matter. NYMEX and CME operate pretty much the same, except that they offer different products. I'm not sure what that link was about either. You are the one that seems to think there is "escape clauses" in these contracts. I suggest you do the reading cause.

    Anyway, I'm done with this conversation Jack. I hope you have a great time telling everyone how smart you are this weekend.

  • In reply to chris:

    After about 20 minutes on the elliptical trainer, I reappraised my position on this topic.

    1. Daley and his handpicked minions to the CTA--Kruesi, Huberman, and Rodriguez--think that they know more than the rest of us. At least in Kruesi's case that was demonstratively untrue, but it proves that none of the four are going to listen to anyone else. You can throw Carole Brown into that category, as demonstrated on her blog. Thus, the premise of this thread "Advice to the CTA on how to make $35 million in cuts" is futile, so besides legal advice, I'm not giving Rodriguez any more operating advice either through this medium. As to Chris saying "Perhaps you should go work for the CTA and run this department," Daley thinks he knows more than me, so he or his tool won't appoint me (at least until such time as I organize a Hispanic Campaign Committee for him).

    2. Chris, again, demonstrates that he doesn't understand what I am talking about. Nonetheless, I understand his line, similar to those of most CTA apologists, that CTA management can't be held accountable for things they can't change tommorrow, for foreseeably bad decisions (JMan, Chris doesn't think the fuel hedge should be investigated), for advocating for changes that might markedly cut into the problem, etc. It is a bad undoable decision, so accept it according to Chris.

    Therefore my only conclusion is bring on a fare hike to the level that the realized passenger income per unlinked trip rises from 91 cents to $2.50. That is what rational economists would suggest, and would expose the true cost of the free rides program and other CTA waste, such as conditionally accepting buses that did not pass mandatory federal tests. Then, after things settle down, adjust service levels to the resulting demand level.

    That's the only thing that CTA has the authority to do on its own, fairly immediately.

    Also, like Bilandic not plowing the snow, and Jane Byrne fomenting a CTA crisis in 1981, my suggestion, along with the parking meter fiasco, may actually motivate Chicago voters to do something about their hereditary monarch, who, need I say it again, pulls the strings at the CTA.

    This is the last that I will be visiting this topic, so reply all you want, Chris, but accept that.

  • In reply to chris:

    James Reyes is right to point out some of the other smart things CTA can do to get some more revenue. Oh wait... One of the first things RRod did when he started at CTA was fire all the people whose job was to find new revenue like that. Oh well, James, maybe some other time.

  • In reply to jack:

    Kevin O, you say, "... hopefully, this is a short-lived problem, and the tax revenue will come back as the economy improves. If you cut entire routes now, it will be extremely difficult to get them back."

    Would you change your opinion if someone told you that they're not coming back? If you actually knew that CTA will NOT have the money a year from now, would you still say that?

    Maybe not. Should CTA have a bus route out in Westchester? Does it need so many winding routes in Evanston? Why does that #24 route parallel the Dan Ryan--is is needed? Does the X4 really provide something much faster than the #4? Does everyone one of those North LSD #134-6 and #143-8 routes really serve a purpose and they can't be cut or redesigned into something more efficient? Do so many routes really need to run past midnight? What's needed and where on early morning Sundays?

    Why are small fare hikes not on the table? Why can a college kid pay $90 and ride as much as he wants for 3 months and the working stiff next to him pays over $250 to ride for 3 months and a High School kid pays probably $120? Why does someone who takes a bus then a rail ride ($2+$0.25) pay the same as someone who just takes the rail ride ($2.25)?

    I don't know the absolute answer to those questions, but I'm not going to blindly just say that frequency reductions are the only "smart" thing to do. I'm certainly not going to take the word from a guy who's been on the job only a couple months, who clearly didn't want the job, and freely admits he doesn't ride that much.

    I've been saying this for some time now: CTA's fiscal problems are not just coming from the recession. They have a massive structural problem with escalalting labor costs, health care and pension bond obligations. If this recession turned around right now, they may not have to cut in September, but they'd be cutting in January. CTA cannot afford, even in good times, even with seniors paying their fare, even if they got gas only at $1, to operate the number of buses it has and to fund the replacement and capital needs of those buses. There is not enough money out there. Look around: no one has it.

    The political mistake RRod is about to make is that he's not using this crisis to fix some of these problems. He's setting himself to have to come back in another couple months and propose more cuts and probably another fare hike just further erroding any confidence that may be left, because he's presenting the false impression that this has been caused by the recession--it hasn't.

    *****

    Ps: the fuel hedge is not just a mistake that needs to be studied by RRod, but actually by someone higher up.

  • In reply to jack:

    ----
    I'm betting with Reuben on this one, because it is the politically easy thing to do.
    ----

    Well, my representative, Julie Hamos is the chair of the mass transit committee down in Springfield. If Julie stands by while service is cut in Evanston, it will be her ass on the line.

  • In reply to reub2000:

    Well, it was the last time, too. The 2008 bill she "shepherded" didn't turn out so well, especially with regard to its "reform provisions," no matter what one would have thought then and now about the revenue provisions.

    And that may be why CTA at least previously always started with a plan that cut out Evanston--to put the pressure on Hamos.

  • I was referring to the doomsday plan from 2007, which cut off every bus route in Evanston. That plan would have created a nightmare for Evanston residents without a car.

  • Unless some statute prohibits it,the C.T.A. could sell advertising on their website.Even so ,they could build a shadow site specifically to sell advertising while providing links to C.T.A. services.
    The C.T.A. could also partner with advertisers,where riding public transit offered premiums.Send in your old one day pass ,get a free gym membership for a week or a free music download.

  • (The reason why this is a general post instead of a reply to Reuban was because there is a bug that caused the sign in screen to come up all 5 times I tried to reply to him/her, even though I was already signed in. Someone may want to look into that.)

    This happens to me all day long everytime I try to post. I have to leave the posting, then come back for stuff to work. I use FireFox 3 if that helps at all, but this clearly needs to be fixed Kevin. I mentioned this before and they were confused about what I was describing.

  • Thanks Chris and MK. I have reported the Reply bug to developers.

  • Yeah, I realized that was what the 2007 cuts where about. The bus route that I regularly ride, the 97 is probably pretty safe. I also realize that diverting money from the capital budget to operating probably means that tracks on the north side main line probably won't be fixed for many years.

    Now, why can't the CTA sell ad space on transit cards?

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