CTA looks to private sector for partners on Red Line south, north expansions

The CTA has received an "overwhelmingly enthusiastic'' response to its overtures to private sector investors to partner on expansion projects at the far south and north ends of the Red Line, CTA President Forrest Claypool said in a Tribune story.

The CTA is working with consultants from Goldman Sachs to review possible partnerships to build the Red Line south extension to 130th Street, and to complete the Red-Purple Modernization project.

According to the Tribune article:

"Claypool said the CTA was not interested in privatizing the operation of the Red Line or selling it off to the private sector. Instead, any deals would involve a public-private partnership to design, build, finance and maintain the rail line, but CTA employees still would run the trains, he said. In return, the venture partners would assume part of the financial risk of building two complicated projects and receive "a small potential share'' of profit."

Claypool pointed to a $454 million contract that the CTA signed last year with Cubic Transportation Systems to design a new fare-payment system as a solid model for future CTA public-private partnerships.

Well folks, it should be interesting to see how this unfolds. With federal money shrinking, it makes sense to start exploring other funding opportunities. And I like the Cubic model, where the CTA gets out from under the expense of providing fare medium while earning some decent bucks to let another company do it. Pure genius.

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  • I commented on the puffery yesterday, which is what it was.

  • So basically, the CTA would leaseback the lines for several decades & pay huge yearly fees to some rich foreigners, thus causing huge fare hikes to cover the cost, instead of getting the cash the usual ways.

    Sounds like Richie Daley is running the CTA!

  • In reply to ScooterLibbby:

    From what one can make out of Claypool's gobbledegook, I don't think he was saying that, although one can't figure out what he was saying. The Ventra deal only seems to mean that if Cubic wants to take over the job of issuing transit currency, for which CTA is willing to pay $450 million, that's apparently $50 million less than the cost of CTA collecting the fares itself.

    There was the proposal about a year ago to have a private operator manage the 74th Garage, but later it was said that CTA was just trying to see what offers it would get, and nothing has been heard about that since.

    But we have to get back to the AECOM comment that there has to be a profit for the Private. In the Skyway and parking meter deals, there was a clear source of profit--raise the tolls and fees, and in the parking deal it apparently was to pay a very discounted amount up front for the right to raise parking rates to over $6.

    Now, is there any way to do that on the Red Line, i.e. most of CTA would have a $3 fare, but if you ride the Red Line [north of Wilson or south of 95th], it is $10? No. In any event, CTA is going to have to raise the fares systemwide to cover the sales tax money being diverted to sales tax bonds being used for capital.

    There might be other ideas, like giving away land at 115th and Michigan for a transit oriented development, but does someone really want to develop there?

    So, that's why I said it was mere puffery. Now, if Claypool had put on the table what the proposals really were ... but he won't.

  • Pure genius, yes. Another form of giving away public infrastructure and future fares earned rights to private interests. Made possible by having fares collected(or larger and larger portions of fares) via the Ventra Card system to go directly to the debt holders.

    Let's see, a company in Spain now owns the Chicago skyway(higher and higher tolls), a private company meters city street parking(higher and higher parking rates), and now Goldman Sachs to arrange multi-billion dollar deals that are so "good for us".
    Pure Genius.

  • I have to agree with JohnT. Some company is going to make a boatload of money off those of us who use transit.

  • In reply to Cheryl:

    I guess you ought to protest the Cubic deal then, because they are getting $450 million in gross revenue directly traceable to the passengers.

    As some transit activists claimed about 10 years ago, all of this would be unnecessary if everyone got free rides. They also claimed a public policy justification for giving them.

  • In reply to jack:

    Yes, but they also have to provide a service to get that $450 million. My understanding is that the CTA basically cut its costs by $50 million.

    It will be interesting if Cubic actually advertises on behalf of the CTA to encourage more card/transit use, driving their own revenues as well.

    As for the new deal that Claypool is vague about, I get nervous knowing Goldman Sachs is involved. They don't get involved in anything where they lose, after all they are "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

  • In reply to chris:

    chris: I have the same understanding of the Cubic deal. Any savings from a potential 74th Garage deal would be the same. For that matter, CTA is contracting with NAPA to manage its parts inventory. [NAPA Know How.]

    Essentially the problem I have with any analogy to the billions needed to build the two Red Line projects is that CTA isn't paying a private entity to do something more efficiently than the CTA can do itself, but is trying to find some way to get a private entity to finance at least a part of the project. Short of something like the the transit oriented development scheme described above (i.e. such development doesn't make sense unless a rail line and a station is built there), I don't see, and Claypool certainly didn't explain, how the billions or a portion of them is raised to start construction. It isn't like Canadian National is asking help so that it can build a commuter railroad on its right of way between 95th and 130th, which is what the more conventional PPP is.

    Thus, despite your characterization of GS, I don't see how this works, at least without the details.

  • In reply to chris:

    I was at the 2nd District Candidates Debate last night; a L O T of people were of the opinion that "Goldman Sachs and the Red Line Extension" smells like "Krugerrands and Diamonds" -- "Exploitation for Profit"

    This won't go down easy.

  • But did any candidate say that he/she will work to get the federal share of the funding?

  • In reply to jack:

    They didn't touch on transportation, all the topics were predetermined - and the public had no input.

    I was talking about the folks in the audience - they A L L saw the Parking Meter Deal, the Skyway Deal, Diamond Mines in South Africa, and Vampire Squid.

  • OTOH maybe some else could make our transit "system" work even if it snows a little.

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