Deal reportedly reached to avoid CTA fare hike
Posted by Greg H. at 11/10/2009 5:35 PM CST on Chicago Business

Transit officials and Gov. Pat Quinn have reached agreement on a deal that will avoid a threatened Chicago Transit Authority fare hike, both in 2010 and 2011.

According to reliable sources, the deal involves the Regional Transportation Authority issuing bonds for capital projects that would be funneled to the CTA. That would allow the CTA to shift some federal capital funds into its cash-short operating budget, thereby avoiding the necessity to hike fares.

As part of the deal, the state reportedly would help the CTA pay debt service on the RTA funds for at least a couple of years. Other monies would go to Pace, which has had trouble financing its para-transit operation.

Sources said the deal is to be formally announced at a press conference featuring Mr. Quinn and transit leaders as soon as Wednesday afternoon.

If the deal comes about as promised, the CTA would not as threatened raise most fares a quarter -- for instance, all el rides would cost $3 -- but would go ahead with about $90 million in service cuts.

^ What? Still going forward with the service cuts?

Damn, that's a shame

^^^ No, what they are doing is going ahead with service cuts and also mortgaging the future of the CTA and RTA with lots of bonds that will just suck all of CTA's funding dry in the future. Lovely plan guys, too bad it doesn't involve growing any balls and actually fixing the problem. I've said this a million times, its stupid pandering to special groups like this that makes me Libertarian. They can't do anything right because they are too afraid to lose votes...

Just playing devil's advocate here, but isn't this (i.e. borrowing from future hypothetical tax increases to pay for spending today without a present tax increase) just a form of pandering to anti-tax voters?

^^ Wasn't that his point? I'm confused.

Yes it is, which is a big reason why I am a libertarian and not a Republican (other reasons include the fact that Republicans pretty much want to kill everyone who isn't WASP except the Jews and don't like political freedom or free thought). Libertarians are for the reduction of the size of government then the reduction of taxes. Republicans are for the reduction of taxes and the reallocation of all government spending to the military-industrial complex regardless of whatever massive deficits it creates.

In other words, the if the government kept their filthy hands out of the transportation business by not massively subsidizing the construction of highways, the private mass transit companies that built the El and streetcars would never had gone broke. If they would never had gone broke, the government would never had an excuse to expand their power into the management and subsidization (though they suck at subsidizing it) of mass transit. So today we would still have an extremely dense urban center with less open lots, fewer cars, and nearly everyone taking the train or a street car (instead of buses) to work.

Essentially I believe the government gets involved somewhere it shouldn't, throws the natural balance of things out of whack, then uses that out-of-whackness as an excuse that "oh clearly the government needs to expand their power here" which only causes further problems that give them further excuses and so on. So what I am for is nipping that process in the bud and reducing the number of stupid things the government has taken over. Then, once the government saves money by not spending trillions on freeways then spending billions more a year subsidizing the transit they undercut with freeways, we reduce taxes because the surplus would be huge, not the other way around.

I don't have a problem with paying taxes for things like fire departments, reasonable national defense, education, and even health care (if they would just go all the way and make a system that mimics the competition between public and private universities). I have a huge problem with paying taxes to build freeways everywhere, invade random countries, and to line the pockets of bureaucrats. I also have a problem when the baby boomers, because they are demographically huge, rape and pillage the future of my generation by cutting taxes for themselves and then ramping up government spending through the roof and dumping the massive deficits on me for me to pay someday when I have a good job (assuming the boomers slash and burn of our country doesn't destroy all the jobs...).

^I don't know whether to dignify such drivel with a logical response, but your view of history is pretty laughable. Most of the private transit carriers were merely support for subdivision schemes or ways for the founders to skim off the construction profits and leave stockholders holding the bag with a train line to run. Most of them were bankrupt by the 1920s, and virtually all by the end of the 30s. The geometric growth in auto ownership dragged local governments into making road improvements, not the other way around.

When state governments (and eventually the feds in 1956) began doing large-scale highway improvements, it was politically impossible to pay for them with general taxation in a society where less than half of voters were motorists. The solution was for the highways to pay for themselves, through gas taxes.

Has it totally escaped your notice that your theory has no proof of any kind? That no transit system, anywhere in the world, under any system of government, operates without heavy taxpayer subsidy?

^^^ I was waiting for another arrogant post from MrD.

Thats exactly my point, there are no longer any major private transportation systems because the government in the US took all them over because they messed it up by forcing gigantic freeways through the centers of downtowns. However, if you look at my "laughable" (but entirely factual) view of history, there were in fact dozens of profitable mass transit systems until the massive building binge on auto infrastructure occurred. I know that there were profitable systems in Milwaukee, Chicago, New York, and many other American cities all of which became suspiciously unprofitable as soon as freeways were built.

When it comes to the gas tax nonsense you always bring up, last time I checked a gas tax is still a tax and still counts as government spending and intervention. The important part of the construction of freeways wasn't so much that the government was spending money, it was that the government had the power to mess things up in ways the private sector could never dream of. For example, do you think that a private company could have arranged for any of the downtown freeways to be built by buying properties on the market and tearing them down? Do you think any investor would take that risk? No. The government had to come in with eminent domain and completely tore apart the fabric of the urban core and punched freeways through, it doesn't matter where they go the money, it matters that they used force (something private citizens cannot legally use) to make things happen that bankrupted the railroads.

Also, if transit was so unprofitable, then why were railways so profitable (among the most profitable industries in history) for about 70 years?

Sorry MrD but your opinion doesn't count as history and your are not superior to everyone in the world because you have some job in planning... Also, I heard the shadows over Grant Park caused by evil highrises are actually why its impossible for private mass transit to exist.

Also this isn't even a legitimate argument. This is the status quo, its not evidence. If this argument were true then we wouldn't have private communications companies or airlines (among countless other examples) because, until deregulation, they were all publicly owned, operated, or controlled.

Spoken like a true academic.http://forum.skyscraperpage.com/imag...s/rolleyes.gif

Granted the Libertarian viewpoint is complex, but most people's takeaway from it, aside from narcotic legalization, is that government and taxes are bad. My point is that the current technique of borrowing against the future is the inevitable result of the horror a large chunk of the voting public expresses regarding anything remotely resembling a tax (and yes, this includes the less-nuanced among Libertarians - even though they favor balanced budgeting, they will never pass up an opportunity to oppose a tax under the 'starve the beast' logic). In fact, I think one could extend this line of reasoning to try to understand most of Chicago/Illinois absurd tax structures, wherein the property tax levy is sacrosant and any increase, even at the rate of inflation, causes granny to resort to a cat food diet, so instead we resort to nickel-and-dime taxes (which happen to be highly cyclical, natch) to actually fund the government services everyone takes for granted and demand continuation of, apparently with money growing on trees. It's more an issue at the local and county level than the state level (e.g. the county's sales tax hike because its property tax levy was capped, the city's myriad little consumption taxes, etc.), but clearly the success of the technique locally is rubbing off on Springfield

Besides, my impression is that his remark regarding pandering was directed more towards seniors and labor unions rather than anti-tax types, which hadn't previously been raised.

...and that's when I tuned out.

Those profitable railroads were generally only built and profitable because the legal path was cleared for them by government. Read up on land grants, operating franchises and the like. You think the L getting built over alleys and streets, or railroads linearly traversing entire states, didn't involve government involvement on some level? You'd be profitable too if you owned a government-protected monopoly (or perhaps at most, duopoly in some markets) for interstate movement of bulk goods.

If government had never got involved in any sort of infrastructure development you'd have something closer to India circa 1990. Well-oiled wealth-producing machine of pure efficiency, eh?

Quite simply - no. The construction of highways had nothing to do with the companies going broke. The companies were long gone by the time highway construction started in Chicago.

The private lines started having financial troubles in the 20's, and the depression killed them off. They received massive Federal assistance during this time - the first subways in Chicago were paid for by Federal grants given in 1937. By the early 40's all private transit companies in Chicago were in receivership. The CTA was created in 1945 to take over all of the lines. Highways were built much later: The Eisenhower opened in 1955, The Kennedy in 1960, and The Dan Ryan opened in 1962. All opened decades after the transit companies had gone broke.

Many of the transit companies were never meant to be self sustaining businesses. Yerkes desribed his business model as "buy up old junk, fix it up a little, and unload it upon other fellows.". That is exactly what he did with the lines he owned. Insull was involved with transit to help him sell electricity and land.

I know you're talking about urban railroads, but it's also worth noting that the railroads through the old west were not only built on land granted to them by the government, but they were also typically given miles of land on either side of their ROW that they could turn around and sell to speculators/settlers, further enhancing their profits.

Gas taxes haven't covered the cost of highways, much less the cost of new cosntruction, in decades. I'm not necessarily saying that that means that they should all be ripped down as insolvent, but the idea that they are paid for purely by users is simply incorrect.

Hong Kong, Osaka, Taipei, Tokyo, London

http://en.wikipedia.org/wiki/Farebox_recovery_ratio

The libertarian line of "if not for government, everything would be perfect" quickly loses steam when one is forced to interact with reality. I too was sympathetic towards the anti-government mantra as an anti authority rebel in college. Then I entered the real world, where i discovered that (i) people are inherently irrational and easily manipulated and need some sense of order and guidance so as not to revert to a primitive and tribal state of mind; and (2) government has and always will be the basic foundation of absolutely everything we know and ever will.

In the case of transit, how do you expect private entities to enter into a contract to build a station without a government courthouse to enforce said contract? How can land for a rail line be purchased without some form of land distribution and acquisition policy created, administered, and enforced by the government? Do you really expect transit safety to be regulated by the market through after-the-fact market corrections? How many people will need to die before such a correction will happen? Wouldn't it make more sense to have some uniform safety policy set forth by the government? Or do you expect the victims to rely on the government created and administered tort system to sort out the money damages?

As for your hatred of special interests, perhaps you should look to the spineless politicians for blame. From my experience, the "appease every tiny interest group" phenomenon is quite recent. Taxes were raised and budgets slashed regularly throughout the 20th century, with and without the support of interest groups. Politicians had balls. Our system is designed to have loud and annoying interest groups, but it also depends on the ability of elected officials to listen to them all and then shut some of them out.

But these just further cement the point - all of these private operations own land and operating franchises granted by government. That would be like the City of Chicago or State of Illinois having acquired land around every transit station (in addition to having acquired the land for the ROW and stations themselves), giving those assets to the transit operation, then bidding out the operation of the service via a concession agreement. At some point, there was still not only a public expenditure, but there is also application of force/law that is solely the purview of government. Their present 100+% farebox recovery ignores past public investment in the property acquisition (at minimum) and likely also public investment in the capital expenditure to construct fixed assets. Further, there's assorted other indirect subsidies: e.g. do any of the above operations pay local property taxes on their ROW and stations?

Also, the tables in that article have some suspect figures borne of sloppy consideration of "system-generated revenues" vs. "farebox recovery ratio" - the latter is the extent to which passenger fares only cover operating expenses, while the former includes all other incidental revenue such as advertising, real estate, and reserve interest income. The distinction is huge when comparing agencies with varying levels of real estate portfolios. If CTA were collecting rent on downtown skyscrapers and retail malls (built on land granted to CTA by the government) and were politically allowed to raise fares to something closer to revenue-maximization, its system-generated revenue would look a lot more like the Asian transit operations.

I wouldn't consider London a good example of how to privatize transit. The largest private partner in the project went under in 2007, leaving the government with a bill for £2 billion. Currently the majority of the system is run by Transport for London, which is a Government organization.

I'm fine if he wants to argue against seniors and labor unions, although much of his argument seems like standard Kunstlerian ranting. And didn't the City pass a property tax increase recently, despite the recession leading to a substantial drop in market values?

This will probably get lost in the shuffle, but does anybody remember a plan to connect the Eisenhower and Stevenson along the B&OCT corridor, near Western Avenue? I was looking at a map recently and realized how that might be a good idea, as a truck highway, to ease congestion on Western and act as almost an inner ring to divert truck traffic from the Circle, which is aging poorly and can't handle the load of heavy trucks.

The property tax levy (amount collected by the assessor) is completely independent of market values, an oft-misunderstood nuance which is a big part of why everyone starts lighting up the torches to burn the bastille whenever a politician accidentally mentions it. Houston's mayor proudly boasted of lowering property taxes for several consecutive years even while total property tax revenue increased, since in Texas property tax is set by a rate. In contrast, here at home a compounded 5% increase in property tax collections over 2 years ($329m) is called the "biggest tax increase in history" by the Tribune, which is strictly accurate ($329 is indeed the biggest) but very misleading.

Chicago Public Schools has been raising it's levy, but the City hasn't. Of course, the City gets money from TIFs, which is like taking money from the schools, thereby making CPS more likely to raise their property levy since it is their only revenue source and they have minimal public oversight that might make them hesitant in raising their levy, unlike the City Council. It would be way more efficient to just let the city raise it's levy rather than force all the districts to raise theirs (Cook County, who has also lost property tax revenue to the City via TIFs, instead turned to the sales tax, because the anti-tax types capped the County levy. Check page 60 here to see the total property revenue: http://198.65.148.209/bof4/08approbi...Estimates.pdf).

Or put another way, it's all totally messed up, which is sort of my point. If the voting public weren't so reflexively anti-tax and instead viewed taxation as a value exchange to be evaluated on it's own merits (e.g. proposed tax X to pay for public benefit Y: yay or nay?) then the entire charade wouldn't be necessary and ironically there would be more transparency and efficiency. Instead, we just get what we deserve, which is Pat Quinn and Mayor Daley.

Agreed on all points. The problem is your parenthetical "proposed tax X to pay for public benefit Y..." Politicians at all levels have gotten into the habit recently of "sweeping" funds into the general budget to adress budget shortfalls. People aren't entirely incorrect when they see a proposition for a tax that's supposed to benefit transit, for example, and they wonder where that money is going to actually end up. Taxes and all funding issues would have a much better chance of actually getting evaluated on their own merits if there were better legal protections placed around them to ensure that the money actually ends up where it is supposed to be and/or if legislatures would simply stop stealing money from one fund to pay for a completely different fund's shortfall.

Similarly, people don't really understand that government money goes into dedicated funds for dedicated purposes (a limited understanding that has been further eroded by the government's own acts, as I just said). People see that the government already has money for public service that I don't like X so why should I give them more money for public service that I do like Y? Why doesn't the government cut X and use that money to pay for Y? It doesn't work that way, and a lot of people (and a disturbing number of politicans) don't understand that, which limits their willingness to vote for any new budget measures as long as their are still expenditures that they disapprove of.