Low public funding requires high system-generated revenue; thus, big fare hike

In a comment on yesterday’s post about the 2010 CTA budget, Ed rightly pointed out that it’s “very very significant” that the CTA’s recovery ratio — fare generated revenue —  for 2010 is almost 71%. By law the minimum recovery ratio is 50%, but “the significant reduction in public funding forces a recovery ratio for the CTA that far exceeds the requirement,” notes the CTA’s detailed budget recommendation.

The budget document goes on to say:

The recovery ratios in other regions throughout the country are far lower depending on the level of public tax support for transit in those regions. The Chicago region is one of the few in the country with a legislatively mandated recovery ratio of at least 50%. CTA, Metra and Pace together have a higher system-generated fare recovery ratio than almost every other metropolitan region in the United States, even when accounting for different methodologies used in calculating the ratios. If the region is to effectively use enhanced neighborhood public transit services to fight congestion, improve air quality and increase regional economic competitiveness it needs to evaluate the effect of the mandated recovery ratio.

The CTA expects to get almost $700 million in system-generated revenue in 2010, and just under $500 million in public funding through the RTA. Add $90 million gained from transferring capital funds to preventive maintenance, and total revenue is $1.285 billion. Of course, the operating budget is $1.285 billion as well, a 10.3% increase over 2009.

Labor expenses make up 66% of the operating budget, or just over $850 million.

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  • Other sources have noted that while the statutory recovery ratio is 50%, after all the exclusions from the recovery ratio, such as the pension plan and security, the actual statutory recovery ratio is about 33%.

    Pace shows the problem with playing the recovery ratio game, in that they sued to have transfers of capital treated as revenue, won, then ran out of money. They played other games, such as counting Downers Grove revenue as part of the recovery ratio, even though that operation is supposedly independent, or telling Schaumburg to run the trolleys with no fares and 100% village payment. Now, because times are tight, not only are sales tax revenues down, Oak Park has eliminated its trolley, and Schaumburg has cut its down to Friday and weekends, and eliminated the lunchtime shuttles.

    Of course, we are all waiting for the howling that will occur, should the paratransit fare be raised to either that allowed by the feds (apparently it would be $5 in Chicago) or that mandated by the recovery ratio of 10% (which would result in a fare of at least $4, according to reports).

    Which get to the point--no matter what the recovery ratio, there is only so much money generated by the RTA taxes. With the howls rightfully made about [expletive deleted] Stroger's sales tax, are you advocating tripling the RTA sales tax, so that it has a sufficient cushion to meet the recovery ratio and all the setasides in the RTA Act? After all (need I repeat), funding is a euphemism for taxes. That's right, just drive more business out of the county.

    When CTA stops cooking the books (i.e. playing around with what is a ride that generates $0.91 in revenue one month and $1.07 in another, when the boarding fare is $2.25), let us know.

  • Another thing to consider, in connection with cooking the books, is that transfer of capital is not money customers are depositing in the farebox (or having deducted from their smart card accounts). It is a detriment to riders, if things stay in their perpetual state of disrepair, but according to this budget, CTA has the money to fix the North Side Main. Now, if in fact, is shrinking to the point that it no longer needs to replace the 280 some buses it is retiring ad the Archer Garage, and certainly has no need for the contract for up to 900 articulated buses (fooled you, New Flyer), maybe there is money to transfer from capital to operating.

  • I have been reading the budget stuff, and 2 things concern me:

    1. They are leaving the transfer fee at $.25. Why not raise it to $.75 and defer some of the fare increase. Transfers are way too cheap compared to the way everything else is structured. Also, it appears that if you ride a bus and then transfer to the train, it would cost you $2.75, whereas riding the train alone would cost $3. So in that case it is actually cheaper to use more services. CTA did not thoroughly think this one out.

    2. They also propose cutting rail service nearly 10% across the board. That will really strain a system that is at or near capacity on many lines during much of the day.

  • In reply to joeconey:

    Transferring from bus to train would cost $.75. The train ride would be counted as the first ride ($3) and the bus would be counted as the transfer ($.25) even if you boarded the bus first.

  • In reply to cta34573458:

    I don't think what you're describing is possible since the fare collection machine would have to know in advance how (or if) you plan to transfer to charge you appropriately. What you're saying is that everytime I got on a bus, it would charge me $0.25 instead of a full fare.

  • In reply to chris:

    The way it works with the current fare system is that you're charged $2.00 to get on the bus and when you get on the train, you're charged for a $.25 transfer as well as the additional $.25 you would have paid had you used the train first for a total of $.50. So you're paying the full train fare regardless of whether you used the bus first or the train first. There's no reason to believe that will change with the next fare increase.

  • In reply to cta34573458:

    Well, if they do it like you said then that makes sense. I don't always notice since I have a monthly pass and don't worry about the cost. Plus, I don't transfer from bus to train a lot.

  • In reply to cta34573458:

    Why can't they reduce the fare increase to allow for a 50% recovery ratio?

  • In reply to chris:

    Because if the sales tax and RETT aren't generating the money, from where is it going to come? Unless the CTA has been made the 13th Federal Reserve Bank, it just can't print money.

    So Chris, where is it going to get the $300 million or whatever? Maybe you should reread Post #1 on how to fiddle with the recovery ratio and lose, as Pace has done.

  • In reply to jack:

    Nevermind, makes sense now...

    I guess if the tax portion ever picks up they'll have really nice flow of money, but that could be a while...

  • In reply to chris:

    If by 2010 the CTA can truly generate enough revenue to fund 71% of operations, I think that is close enough to start deliberating whether the CTA can be privatized. This would reduce stress on the state's coffers, give the CTA new flexibility to escape union contracts and liabilities, and create a new environment where customer satisfaction is always the number one priority. Its been done before... MTR Corporation in Hong Kong, look it up.

  • In reply to stephenw235:

    I've recommended before (starting with deleted comments on Ask Carole) that operations be privatized, such as in Las Vegas or Phoenix. That would mean that a professional transit management company (such as Veolia, MV, or First Group) take over management from the political appointees and payrollers.

    However, if you suggest private ownership of the transit lines, no one will take that over if they are guaranteed an operating loss of 29% (probably much worse if only farebox receipts are counted), and no money to cover capital. The Las Vegas or Phoenix model requires that some government body provide capital and an operating subsidy. The best that can be hoped is that operating costs would be reduced because the private operator would not have the incentive to keep loafers, and would not be subject to the IPLRA. Whether it could make a better deal with the ATU or have it voted out, I don't know.

    One can note that, in comparison, when CTA took over the streetcar companies in 1947, those companies were delinquent on their bonds and city franchise payments, but were current on salaries, paid taxes, and had an equipment replacement reserve. Compare that to the current financial state of the CTA.

  • is the data out there to compare the labor costs for other such systems around the US?/(World) just seems like any other govt org where the union wants more and the solution is just to raise fares/taxes

  • In reply to returner3:

    I had a similar question ... Budgets are published. The trouble though is while each agency appears to use GAAP, I think depreciation or other credits, that on paper reduce labor expense and alter the ratio, vary from agency to agency which makes point blank comparison's more difficult. I would like to know if there are best practices set by a global public transport group. It's nice to compare yourself against something but ultimately with the leadership in the state it is in, I don't get the impression they'll give a hoot. The politics of Illinois transit is under siege and begs for an overhaul before things will improve both in operations and capital spending.
    After hearing him speak for all of 20 mins last week at the City Club of Chicago - the secretary of IDOT cares more about fixing roads and getting road capital spending out there to put people to work (which is good too) and differentiating his administration from G-Rod's than he does about putting a plan together for mass transit here in the Kingdom.

    NYC MTA publishes a lot of financial as well as planning/capital data. Looking at 2Q for 2009, http://www.mta.info/mta/budget/pdf/09q2_financial.pdf on page 87, it seems that NYC MTA's ratio of labor expense overall to expense for the quarter was 63%.

    Boston's MTA ratio for 2008 was 44% (http://www.mbta.com/uploadedFiles/About_the_T/Financials/FY2008%20MBTA%20Audited%20Financials.pdf) page 5.

    Those were just quick glances.

  • Since you mentioned it, I looked back and found the references to it in the budget. It supposedly has to do with track fasteners. However, later on, in referring to those projects, it says that the tracks are more than 30 years old. Since this applies to the Green Line (south side), which supposedly had its tracks completely replaced in 1996, and the Dan Ryan, which was dug up a couple of years ago, you are right, something is wrong here.

    But I don't know if CTA can apply for New Start funding for the North Red Line if the projects aren't in the hopper already (this budget is totally inconsistent regarding the Red/Orange/Yellow New Starts vs. the Circle Line). They might be fomenting a crisis to get the state funds released, but I doubt that they can instantly invent a funded new start.

    BTW, Mayor Daley is reported to be saying that the fare hikes are ugly, but so is he.

  • In light of our high system-generated avenue, isn't it just fantastic that rich senior citizens don't have to pay a penny! Awesome!

  • The C.T.A. should sell umbrellas, mittens and other weather related clothing as a way to bolster the bottom line.Disposable seat covers might be a big seller too.

  • It would definitely be a messy project, but I'm not sure if it would be as awful as you'd think. The viaducts replaced on the Purple Line were done in a weekend. The bigger problem would likely be the real estate acquisitions needed for staging the work, like around the Loyola campus where there's literally no extra room around the tracks.

  • I got it from my Chicago Card Plus fare history... haven't used pay-per-ride in a few months but that's what happened last time I went from bus to train.

  • Focus on reducing travel times and they would save a lot of labor costs.

  • Focus on reducing travel times and they would save a lot of labor costs.

  • Focus on reducing travel times and they would save a lot of labor costs.

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