CTA faces $10 million budget gap this year

CTA riders really haven’t liked paying more for multi-day passes, but the agency’s number crunchers inaccurately predicted just how much we hate paying more. As a result, the CTA is now looking at a $10 million budget deficit for this year, the Tribune reports:

Transit officials promised to eliminate the budget gap without imposing more fare hikes or cutting service. . .

The deficit is driven by incorrect revenue forecasts mostly involving the use of passes. Those system-generated revenue forecasts, which were produced in December, are off the mark by about $39 million for the full year, CTA budget records show.

The biggest miscalculation involved a nose dive in the use of the 7-day pass since pass prices were increased in January. Seven-day pass sales were below budget projections by $7.5 million in the first six months of 2013, the CTA reported.

The good news is the budget damage was mitigated by an improving economy, as the CTA saw an unanticipated increase in sales tax and real estate tax revenue. From the Jon Hilkevitch story:

Those public funding sources are up $13.2 million through June and are projected to be a total of $21 million higher than budgeted for the full year, officials said.

One thing to remember is that the $10 million budget gap is small compared to the $1.39 billion budget. It equals about 0.7 percent of that overall budget. That’s why the CTA will be able to make administrative cuts without raising fares or cutting service.

It’s still too early to tell what effect the pass increases will have on next year’s budget. I’m a bit pessimistic about the CTA’s ability to not cut service or raise fares next year. After all, they had to raise pass prices this year as a partial solution to a $165 million budget gap for 2013. Perhaps the economy will stay strong and more tax revenue will rule the day.
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  • This is the same agency that miscalculated the price of diesel oil & hedged it at a price that that ended up way higher than just buying it on the spot market would have cost.
    That cost the CTA millions through incompetence!

  • In reply to ScooterLibbby:

    And I thought I was the only one who mentioned that--and that the CFO still said that it was "under budget." At least CTA now has a new CFO.

    I had mentioned earlier in the budget cycle that if one believed Emanuel that there wasn't a fare increase, buy some Metra 10 ride tickets. Metra admitted its mistake, sort of, except all the actors are now gone. Anyone going to take bets on whether CTA will admit a mistake?

    If CTA is really going to take it out of administrative costs, I suggested one area where it could save a quick $600K. That gets them started. However, I really doubt that they will take it out of patronage, I meant to say administrative costs.

    Finally, that Finance Report hasn't been posted yet. This would be the first month when I assume that the CFO would have to acknowledge that a big chunk of the Ridership Report consists of free boardings.

  • In reply to jack:

    You're the one I learned about that one.

  • In reply to ScooterLibbby:

    CTA is understandably roundly slammed for not being run like a business. But when it does what many other businesses do and engages in fuel hedging, its "incompetence!" if it guesses the fuel market wrong. Like many airlines also did back in 2008.

    http://www.nbcnews.com/id/26761843/#.UhIzNpLVCSo (Sept. 2008 news story). IMHO the key quote in the story is "Other airlines have not disclosed their hedging losses or gains for the third quarter, but it is likely that United was not alone in underestimating oil's dramatic fall."

    http://atwonline.com/operations/airlines-losing-gamble-carriers-suffer-big-losses-fuel-hedging-face-future-liabilities (Jan. 2009 airline-industry news story). Southwest Airlines and "nine major Asian carriers" lost billions on their fuel hedges that were staked out when "predictions of $200 oil were within the mainstream of expert opinion in the early part last year" that is, 2008.

    IMHO, the key quote in this story is "Some airlines, such as SWA, have been hedging aggressively for years, a strategy that proved beneficial when crude oil prices skyrocketed to as high as $150 per barrel in the 2008 summer. Others that had been reluctant to place bets on fuel prices in the past scrambled to hedge last year as fears of $200 oil became prevalent."

    Is CTA incompetent? Not gonna argue. :-) Is the fuel-hedge loss proof of incompetence? Nope.

  • In reply to jbredin:

    The differences are:
    1. The CFO covered it up by saying fuel was under budget, even though it was about $1.20 a gallon over market.

    2. Unlike United and I assume most other airlines, CTA was gambling with taxpayer money.

    You can go back to the 2009 financial reports and see what the CFO reported. Maybe CTA didn't foresee the plunge in oil prices in 2008, but when the RTA asked Pace if fuel hedging is a good idea, Pace said that the commonly accepted answer is no, according to Pace's minutes.

    Now Pace is converting one of its divisions to CNG. CTA isn't. Which one is looking ahead?

  • Perhaps they'll shut down train stations and bus routes, then ask to build a charter CTA.

  • In reply to Cheryl:

    Technically, they can't do the latter (run a bus charter operation) with federally funded buses.

    However, if you mean contracting out management, I've been advocating doing that for about 8 years. Places like Las Vegas, Milwaukee, and Phoenix contract out transit management to companies like Veolia and MV. CTA had sent out a requisition to contract out management of the 74th Garage, except that solicitation apparently was a joke, and wouldn't have worked since, due to union contracts, the private garage manager would only have been an intermediary between the workers and the suits at 567 W. Lake.

    Paratransit contracting out is another example, and the Tribune story today about Preckwinkle's appointment to the Metra board not being legal because the appointee moved from Flossmoor to 340 E. Randolph barely mentioned that he formed a paratransit contractor, so he must be cleaning up pretty good in transit management. I bet Claypool is looking on in envy.

    However, CTA won't turn over its "highly competent management," I mean patronage workers.

  • In reply to jack:

    Cheryl was making a joke about charter schools.
    You know, like the school board shut down a lot of schools and then paid for charter schools?

  • In reply to Olaf1:

    And I was not taking it as a joke, for the reasons I stated with regard to private transit management vs. political hacks. Do you have a response to that?

  • In reply to jack:

    Yes, it was quite obvious you didn't understand the joke, otherwise it would not have been necessary to explain it.

  • In reply to Olaf1:

    If you think that was a joke, you don't understand what kind of mess transit governance is in this region. Have a laugh at that.

  • In reply to Olaf1:

    Olaf, if you want a real joke, read this one from Claypool in the Sun Times. So much for the CTA being an independent municipal corporation with professional management.

    Cheryl, still aggrieved by the cancellation of the Lincoln bus, would understand how Claypool's statement can't be serious.

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