Forbes article chronicles how Blagojevich "pillaged" the CTA

With our disgraced former Gov. Rod Blagojevich now in federal prison, it's instructive to review how he contributed to the CTA's sad state of financial affairs.

A recent column in Forbes reminds us of how Blagojevich demanded free transit rides for senior citizens before he would sign off on the sales tax increase to fund the CTA. From the article:

In 2008, the Chicago Transit Authority had hit financial difficulties and needed a rescue package to prevent it from running out of money. The legislature put one together that involved a little pain for everybody—a sales tax increase, some benefit givebacks from employee unions, and the expectation of fare increases in the future—and sent it to Blagojevich for signature.

Blagojevich sent the package back with an amendatory veto that nobody in the legislature expected. He approved the rescue package so long as it also mandated free rides, at all hours of the day, for seniors—even on commuter rail. The legislature felt it had no option but to acquiesce, even though this hurt CTA’s finances at exactly the time it needed a rescue.

As a result, the CTA’s collections per ride dipped by several percentage points even as expenses were rising, and the agency threatened a huge fare increase, including taking base fares on the Elevated from $2.25 to $3.00. Yet another financial rescue was needed in late 2009. Blago was gone at this point, but the state’s finances were in a complete shambles, and there was little appetite to offer the CTA bigger subsidies or raise the sales tax again.

So, Governor Pat Quinn put together a package that involved CTA’s parent (the Regional Transportation Authority) issuing capital bonds, and then diverting other funds from its capital budget to cover CTA’s operating expenses. In exchange, the CTA agreed not to raise fares for two years—and again, Illinois closed an operating deficit by borrowing money.

The story goes on to report that today we're still facing the threat of higher fares if the unions don't give in on some work rules.

And it all goes back to Blagojevich.

Comments

Leave a comment
  • Whether or not the unions give in on work rules, the CTA needs to raise fares now so they can avoid huge fare increases a couple of years down the line.
    The increase in fuel prices alone requires it. Plus lubricating oil also costs way more & 2100 buses use a lot of that every year!
    This is the same foolishness that caused Metra to have a large fare increase instead of a few smaller ones every year.
    A quarter every year is a lot easier to take than a dollar at once or the possibility of even more than that.

  • We all knew about how Blago was buying votes. And the CTA hasn't been totally consistent, in that they were saying that Free Rides for Seniors was costing it $30 million a year (despite Blago saying it was a no cost program), but the 2012 CTA budget refers to

    Revenues from fares and passes are budgeted at $540 million in 2012. This is an increase of $16.3 million over the 2011 revised budget and can be attributed to the projected growth in system ridership for 2012 as well as to an additional $7 million that the CTA expects as a result of the amended Senior Free Ride Program. [page 29]

    So, if Blago pillaged the CTA by either $30 million or $7 million a year, that's peanuts compared to Quinn pillaging the CTA for $83 million each for two years with his fare freeze scam. Again, page 83 of the budget says:

    The 2012 budget does not include two revenue sources reflected in the 2011 budget: the transfer of $48.2 million in capital funds for preventive maintenance, as well as $83 million
    from the 2009 fare agreement with the state to forestall fare increases through 2011.

    Of course, there is still no indication that the state has paid back the $166 million to the RTA. So, the RTA is short that amount, and, yes, Scooter, CTA will have to raise fares because it won't get the $83 million this year.

    Yet people here still praise the mighty devious Quinn.

  • $30M/year was the original Blago program, $7M/year is the amended program based on circuit breaker is my guess

  • In reply to whateva:

    My guess is that you didn't read either the excerpt or the budget. The $7 million was projected additional revenue for 2012.

  • The politicians that really run the CTA's finances don't seem to remember that just after WWII, they wouldn't let the Illinois Commerce Commission give the Surface Lines & Rapid Transit companies a very modest fare increase while pandering to the public that they kept the fares at a nickel. That led to both companies going bankrupt, which led to the creation of the CTA in 1947.
    Within 10 years, the nickel ride on the streetcars & L went to a quarter & the CTA doesn't have to go to the ICC for permission to raise fares.
    So now the pols in charge [Madigan, et al] are playing the same game, keep the fare low to satisfy a few loudmouths that don't understand anything about basic finances!
    No wonder this state is a total mess, just pass the money problems to the next twelve generations!

  • In reply to ScooterLibbby:

    I had researched this,and technically speaking, the companies underlying the Surface Lines were insolvent and in receivership in 1927. Essentially they issued 20 year bonds with their 20 year franchise in 1907, and when the 20 years passed, they couldn't pay them. Also, even going back to 1907, the stock was in two "equipment trusts," meaning that the trustees for the bondholders essentially owned the companies. Since there was also the Chicago Elevated Railways Collateral Trust, I guess the same could be said for the L. Sort of like getting a title loan from the payday lender.

    However, unlike the CTA, the CSL companies did have solvent retirement funds and an equipment reserve (which CTA took over when it bought out the companies in bankruptcy court), and, according to Lind, never missed a pay day during the Depression.

    Andre and I debated whether CSL and CRT could have raised fares during the Depression, and by WWII, it looked like they were going to be taken over in some manner, the city having plans to do so since 1931, but not a manner of doing it itself. As Lind points out, after several unsuccessful efforts to reorganize the companies, the MTA Act was passed and CTA took over in 1947.

    The one thing that is correct is that the ICC kept messing with them. There are lawsuits, going back to the 20s,where the companies went to federal court saying that the rates set by the ICC were confiscatory of their property in violation of the Fifth Amendment, and won.

    Of course, the ICC continued its meddling into modern times, in that, during the "transit crisis" of about 1981, when CTA fares about doubled and funding was cut off for suburban systems, the ICC tried to compel the private companies (West Towns and Suburban Transit, and I think also the BN) to continue service under the old terms. The court ruled that even though the RTA wasn't paying, the companies were still under the RTA's jurisdiction, so the ICC couldn't regulate them.However, the bus company cases became moot when the RTA took them over.

    If you have any access to any legal research source, you can verify my statements, and even though I now spit on Wikipedia, before I got greatly angered, had put the sources in the CSL article. I'm not going to look to see if they are still there.

  • In reply to jack:

    You went way farther on this than I ever did, thanks.
    I do remember back in the 1960s that all of the C&NW's commuter coaches & much of the CTA's rolling stock had equipment trust plates riveted to the outside corners of the cars.
    The C&NW's coaches were in several different equipment trusts.
    Now, the only thing I see on Metra's stock is "Metra Owned" & nothing on the CTA's.

    But we still have to come back to the politicians playing to a small group of voters in preventing fare increases.
    As an example of inflation: The CTA fare was 25¢, with a 5¢ transfer, while Ford introduced the Mustang that year for $2364, which was far cheaper than most cars. It was just a fancied up Falcon.
    The current CTA fare of $2.25 plus a 25¢ transfer is 8.3 times the price in 1964, while the current average price of a Mustang is at least $35,000, which is almost 15 times the 1964 price.

    If the CTA fares had kept up with inflation, the current fare would be $4.50 with transfer.
    So a fare of $3.00 wouldn't be off kilter, but for the idiot politicians, who of course never ride it anyway, they have taxpayer paid limousines!

  • Someone asked the inflation question on chicagobus.org, which I discussed here and came to the conclusion that the CTA fare for entering at the rapid transit and getting a transfer should be $3.00 based on government CPI data from 1972, and while fare increases exceeded the inflation rate by a factor of at least two between 1947 and 1992, they haven't kept up with the CPI since then.

    Automobiles are usually not a good gauge of overall inflation, given all the standard equipment mandates over the past 40 years.

    I remember the equipment trust plaques, too. In those days, CTA was mandated to collect enough in fares to cover its equipment, and hence private entities would loan on the basis of that collateral. For the most part, that's not true today, as all three agencies mostly rely on grants. However, one must say mostly, as the back of the CTA Budget has all sorts of leasebacks, grant anticipation notes, and the actual lease of buses 4000-4149. Maybe the difference is that under the Uniform Commercial Code, it is sufficient to file the notice of security interest with the Secretary of State, and you don't need a plaque.

    In any event, and I think you agree, I still don't see any of Quinn's supporters who are usually abundant on this blog, stepping up defending his pillaging of the CTA.

  • Meant 1992 before CPI data

  • Kevin, As others have noted, "And it all goes back to Blagojevich" is a much too simplistic view of CTA's current financial mess. Just think where the CTA, Metra and Pace would be without the tax increase from 2009. We're still using funding formulas and mandates from a mid-1970s transit bailout that was a political compromise meant to keep transit from shutting down. We only act in times of crises and then rely on the political hacks in Springfield to fix complex funding issues. The blame for this mess does not rest solely on Blago's shoulders.

  • In reply to GaryChicago:

    I might quibble with the details, but your point is well taken.

    The only legislation that put transit on a professional footing was the Metropolitan Transit Act of 1945, which resulted in the CTA taking over the Surface Lines and Rapid Transit in 1947. Unfortunately, Mayors Richard M. Daley and Emanuel have ignored that Act and turned CTA into a political fiefdom.

    As far as the 1974, 1983, and 2008 RTA Acts, the only reason they passed was that at those times, all systems were pulled down into a state of insolvency or threatened doomsday. I've mentioned before that the legislative history of the 2008 Act is that the north shore suburban legislators shepherded it through, with little help from the city ones.

    Now, apparently Pace and Metra didn't suffer as a result of Blago's Seniors Ride Free, and Metra was able to impose a fare increase this year. Pace was also able to get the same legislators to change the funding formula so that paratransit gets what it needs off the top (although I also have to note that about 85% of paratransit is within Chicago). CTA has no credibility with the legislators it needs to get any relief, so you aren't seeing a repeat of "Moving Beyond Congestion" and "Ask Carole."

  • In reply to GaryChicago:

    I do agree with Gary that perhaps I was being overly simplistic. Chalk it up to my disdain for Rod.

  • In reply to Kevin O’Neil:

    I keep waiting for actual numbers showing how the CTA/RTA saved $30 million or more after the free senior rides went away. All we get is the same ol' unbacked rhetoric.

    Raising fares during hard times is no way to serve the public or keep public transportation viable. The fare/tax ratio is insane. An honest state tax system is the way to fund public services, not trying to ape the privatization push that worked such wonders with parking in Chicago. But of course our well-pait "tax protesters" will do anything, say anything to maintain their paychecks and their self-righteous indignation.

Leave a comment