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VivaLFuego Mar 26, 2009 5:07 PM

Quote:

Originally Posted by Rilestone75 (Post 4161189)
VivaLFuego, this brings up a good point. Can anyone fill us in on the standard number of years the City and/or the CTA require employees to work before being allowed to collect pensions?

I don't know what it is off the top of my head, but if it is like most public entities, I'm sure it is short. Perhaps the answer is extending the number of years.

It varies among the various agencies, each of which have their own employment contracts and retirement plans: City, Police, Fire, Transit, Schools, etc. Generally speaking, you "vest" in the pension, meaning you are eligible to receive pension benefits upon retirement, after between 5-11 years of employment (CTA is 11, FYI). However, with so few years, your pension benefits will be very low. Most pensions max out sometime around 25-35 years of employment, i.e. at that point you will reach the maximum possible percentage rate of your average salary over the final few years of employment (generally in the 65-75% range). Different pensions also have different minimum ages, before which you can't receive any pension benefits. CTA used to have none - but has since been raised to 55 and later I think to 60. Other funds are similar - generally between 55 and 60.

One of the killers for CTA's budget was retiree health benefits, with people qualifying to receive them after a relatively low number of years and getting very generous coverage. This was one of the major things fixed after the most recent doomsday/bailout cycle, with a reduction in retiree health benefits and increased employee contributions to a retiree health care fund - and more years of employment required to qualify.

Other various differences between pensions: I believe the CTA pension has a 6% employee contribution, but CTA employees still pay social security taxes as well. In contrast, Police/Fire/Teachers I think have in the 9-12% employee contribution range, except they don't pay a social security tax (nor will they receive social security benefits). Each one is different due to a series of historical peculiarities. But the generous ~75% of final salary received by Police/Fire/Teachers is important to consider in the context of their having not paid/received social security, as well, in contrast to CTA.

I think Taft hits the main point: these issues, generally, aren't a result of 'management' - 'management' of public agencies simply operate within the parameters set by elected officials. Sometimes the problem is indeed poor management, but sometimes the problem is structural: the result of laws, statutes, regulations, arbitration - that is to say, politics.

Quote:

It seems to me that city jobs pay pretty well, compared to the rest of the market, and that one of the benefits of working for the city/cta was that while you did not necessarily make a ton of cash, the trade off was for an early retirement with good pension. If that is the case, then it seems these employees are getting it good from both sides. Right?

I'm not trying to stir up drama here, just trying to make sense of the 80% going to pensions...:koko:
Well, in city government you can't get merit-based raises or merit-based bonuses (or bonuses at all...), unreliable/inconsistent cost-of-living raises, and a general expectation that your take-home pay will be somewhat but not drastically less than private sector (perhaps 80%, with the exception of certain professions like Law where you're probably make half or less than your private-sector counterparts). In 'exchange,' historically, public employees could look forward to comfortable retirement and health benefits, and job security. They still have the former, but public sector's aura of job security has basically evaporated over the past decade as almost all Chicago-area public agencies have substantially smaller ranks than they did 5-7 years ago (with the exception of the Federal government)

Taft Mar 26, 2009 5:28 PM

Quote:

Originally Posted by ChicagoChicago (Post 4161234)
I agree…blaming the CTA for its pension problem is completely shortsighted. We should blame the newspaper instead!!!

Chicago has no history of city employees being in bed with the unions. I doubt they would ever fathom getting kickbacks for making sure the pension programs are fat and happy!

/sarcasm

I'm asking you to take a step back and ask "what CAUSED the pension problem?" You seem very quick to lay this at the feet of the CTA (or the CTA's management), but have you ever stopped to think about how much control the agency or its management has over expenditures such as pensions?

As Viva very effectively laid out above (and I believe you alluded to), politics plays a HUGE part in how these pensions have been setup and how much money the various agencies are REQUIRED to pay into them. Blaming CTA management for an expense they have no control over is just plain silly.

And if you think I'm blaming the papers for any of this, you have serious reading comprehension issues. All I am saying is that the papers rarely get into WHY the CTA has funding issues, focusing on sensationalism like "doomsday scenarios" instead. Such shoddy reporting does little to inform the public about the very real issues facing the CTA (and any other public agency). Can you really argue with that?

arenn Mar 26, 2009 5:34 PM

In an ear of ever increasing means to extend human life, the defined benefit pension may not be the most appropriate model. Regardless, the real problem with pensions isn't that people have them, it is that pensions allow an organization to accrue unfunded liabilities. I haven't seen benchmarks versus Chicago, but in many places public sector employees are paid far below market. The pension makes up for low cash pay. However, cash pay has to be paid in cash, while pensions can be paid in promised until they come due. This creates an enormous temptation for people to balance budgets by deferring pension contributions. That's the real issue. If the CTA or any other agency properly recognized and funded the true cost of their payroll, pensions would be a non-issue unless the actuarials change materially.

ChicagoChicago Mar 26, 2009 5:50 PM

:previous:

I don’t disagree that it is useless to blame the CTA brass now for their obligations set forth decades ago. But I give them zero wiggle room in this mess because they keep the budget details under lock and key and cry about the problem. We fund this train wreck (pun intended) and we deserve to know how the money is spent.

Taft Mar 26, 2009 6:26 PM

Quote:

Originally Posted by ChicagoChicago (Post 4161309)
:previous:

I don’t disagree that it is useless to blame the CTA brass now for their obligations set forth decades ago. But I give them zero wiggle room in this mess because they keep the budget details under lock and key and cry about the problem. We fund this train wreck (pun intended) and we deserve to know how the money is spent.

This is definitely something I can get behind. I completely agree local government needs to be more transparent. The CTA has made nominal steps forward in this area, but I'd love to see them pick up the pace.

Taft Mar 26, 2009 7:04 PM

The CTA has a proposal for filling its budget holes:

Quote:

CTA plan would avoid service cuts, fare hikes
Posted by Greg H.
...
Under the proposal from CTA Board Chairwoman Carole Brown, about half of the projected $155-million hole in the CTA's $1.3 billion annual budget would be filled by using federal economic-stimulus funds. Some of that money would be switched from capital to maintenance, a switch allowed under federal law, and some is anticipated savings as the agency reaps the benefits of new buses, track work and other projects that stimulus funds are providing.

Another $18 million would come from internal savings, with about $30 million borrowed from the Regional Transportation Authority (RTA), which has talked about temporary loans to the CTA, Pace and Metra to tide them through a deep recession.

But the key to the plan is $40 million Ms. Brown would like to save by reducing mandatory CTA contributions to its pension fund.

Under a deal worked out last year in Springfield, the CTA restructured the plan, with workers agreeing to cut their benefits and the CTA agreeing to refinance it with a large bond issue.

The bonds were issued and proceeds turned over to the fund, which according to Ms. Brown now has a relatively healthy 84% ratio of assets to potential liabilities. But the agency still has to pay $132 million a year in debt service on the bonds and $58 million a year in annual pension contributions.

...
http://www.chicagobusiness.com/cgi-b...gobusiness.com

Interestingly, Hinz makes mention of the similar problems the MTA is now facing in the column. Take a lesson, Trib!

VivaLFuego Mar 26, 2009 8:05 PM

Quote:

Originally Posted by arenn (Post 4161295)
In an ear of ever increasing means to extend human life, the defined benefit pension may not be the most appropriate model. Regardless, the real problem with pensions isn't that people have them, it is that pensions allow an organization to accrue unfunded liabilities. I haven't seen benchmarks versus Chicago, but in many places public sector employees are paid far below market. The pension makes up for low cash pay. However, cash pay has to be paid in cash, while pensions can be paid in promised until they come due. This creates an enormous temptation for people to balance budgets by deferring pension contributions. That's the real issue.

There is the issue also of the fact that public pensions are allowed to take on an absurd amount of risk in pursuit of higher rates of return. A higher rate of return on investments would of course allow for lower employer and employee contributions and/or better benefits. The problem with chasing high rates of return like 8% is that when the market goes south, you get creamed - I've seen estimates that public pensions in this country collectively lost over $1 trillion in the latest market crash. In the old days, public pensions were required to have the vast majority of their assets in bonds, particularly low-risk government bonds.

From the politician's (short-term) standpoint, everyone wins when you give the fund management contract to the favored fellow promising you 9% annual return: everyone gets their kickback, the employees are promised more benefits for less contributions, the public agency needs less of its operations budget for employer contributions.

Quote:

If the CTA or any other agency properly recognized and funded the true cost of their payroll, pensions would be a non-issue unless the actuarials change materially.
Assume (a) everyone lives longer and (b) a realistic and importantly safe rate of return on the fund, and those actuarials change drastically in a way that any politician would throw his own grandmother under the bus in an effort to pawn off the problem on his successors - anything, such as, for example, issue pension obligation bonds, the equivalent of using a bucket to bail out a leaking boat, with the added requirement of eventual mandatory tax increase (or public service reductions) to cover the debt service on the bonds. Again, from the politician's (short-term) standpoint, it's a win-win no-brainer. There are few politicians who take public pension finance seriously, and Mike Madigan deserves some credit in that regard.

Yes, public pensions are a complete disaster, but saying CTA management is inept because such a high portion of the operating budget goes to pensions is completely missing the issue.

Nowhereman1280 Mar 26, 2009 10:27 PM

Quote:

Originally Posted by VivaLFuego (Post 4161507)
There is the issue also of the fact that public pensions are allowed to take on an absurd amount of risk in pursuit of higher rates of return. A higher rate of return on investments would of course allow for lower employer and employee contributions and/or better benefits. The problem with chasing high rates of return like 8% is that when the market goes south, you get creamed

8%? Psh that's not how you get creamed. Most CD's and bank accounts greater than $1 million will return 5%-7%, I imagine that a pension fund with $100+ million could easily get an almost risk-free rate in a bank deposit of 8%. The losses in the pension industry were largely in places where a few idiot fund managers were running around looking for 10-15% returns on their money. That is where they got into Credit-default swaps and sub-primes. Those funds that invested in that stuff are SOL.

7-10% is also the expected long term return on investments in the Stock Market depending on the industry. A lot of funds are hurting badly because they invested in very reasonable stocks (GE, Citi, CME, even Oil stocks like BP) which have all lost 40+% of their value in the market crash. These were not bad calls and the funds that lost 30% of their value in the stock market will get that money back when the market recovers, which it will eventually do. Investing in a stock like GE or IBM is not a risky investment if you are in it for the long term like a Pension, this just as investing in real estate is not risky if you are in it for the long run.

VivaLFuego Mar 27, 2009 4:43 AM

Quote:

Originally Posted by Nowhereman1280 (Post 4161805)
8%? Psh that's not how you get creamed. Most CD's and bank accounts greater than $1 million will return 5%-7%,

Aren't rates running about 3.5% now? Maybe you could have gotten 5-7% some months ago... of course going all in at that point would have required the fund to have a lower RoR target, which have saved the massive losses they took from being too heavily in equities.

Quote:

I imagine that a pension fund with $100+ million could easily get an almost risk-free rate in a bank deposit of 8%. The losses in the pension industry were largely in places where a few idiot fund managers were running around looking for 10-15% returns on their money. That is where they got into Credit-default swaps and sub-primes. Those funds that invested in that stuff are SOL.
Almost every pension fund in recent years has set targets of between 8-9%, I think.

Quote:

7-10% is also the expected long term return on investments in the Stock Market depending on the industry.
Did anyone bother to stop and question whether this was a reasonable expectation, particularly for a pension fund constitutionally required to pay benefits out every month? If we ignore survivor bias and assume a large investment fund went "all in" when the Dow hit absolute bottom in 1932, they would now be looking at a nominal annual return of... 7%. Absolute bottom. If our fund didn't time their all-in investment so perfectly and went in later in 1932 (while still in the midst of a major depression and asset deflation, mind you) we'd be looking at 6%. Over 70 years, measuring from the market bottom (not from a "long-term trendline"... do that and the RoRs look even worse).

By all means, 8-10% is a reasonable target for the private sector, where risk is necessary for expansion and competition. But for a public retirement fund that must pay monthly benefits in cash, it's ludicrous. And every fund in the country has been doing it for decades now.

Quote:

A lot of funds are hurting badly because they invested in very reasonable stocks (GE, Citi, CME, even Oil stocks like BP) which have all lost 40+% of their value in the market crash. These were not bad calls and the funds that lost 30% of their value in the stock market will get that money back when the market recovers, which it will eventually do. Investing in a stock like GE or IBM is not a risky investment if you are in it for the long term like a Pension, this just as investing in real estate is not risky if you are in it for the long run.
Right, and time was, public pensions could only invest in the safest, highest-rated bonds, which included some corporates as well as government. Relatively low percentages were allowed in equities, even for the relatively safe ones. Hindsight is 20/20, but it sure seems foolish to expose yourself to losing 40% of your fund value when you're sending cash out the door every month in benefits, no? A pension fund is not a normal investment.

BVictor1 Mar 27, 2009 2:11 PM

http://www.huffingtonpost.com/2009/0..._n_179279.html

Amtrak To Get $80 Million From Stimulus For Illinois Projects
Associated Press | March 25, 2009 07:36 PM


Amtrak in Illinois will receive $80 million in federal stimulus money to modernize train repair centers as well as to improve security and wheelchair accessibility.

That's according to a statement Wednesday from U.S. Sen. Dick Durbin, a longtime advocate of the passenger train service.

The Illinois Democrat says the money is the state's cut of the $1.3 billion set aside for Amtrak in the federal stimulus bill.

Durbin also says federal authorities are allotting $90 million to refurbish train cars for use around the country, including in Illinois.

More than a dozen states, including Illinois, are competing for a piece of a separate $8 billion for high-speed rail in the stimulus bill. That money hasn't yet been allocated.

__

On the Net:

Amtrak summary of individual state projects: http://www.amtrak.com/pdf/ARRA/Amtrak-ARRA_By-State.pdf.

denizen467 Mar 28, 2009 1:18 AM

http://www.chicagobusiness.com/cgi-bin/news.pl?id=33476

Region's transportation wish list gets review
By: Paul Merrion March 27, 2009

(Crain's) — Rep. James Oberstar, D-Minn., chairman of the House Transportation and Infrastructure Committee, is in Chicago Friday getting a first-hand look at several items on the region's wish list for the upcoming $500-billion federal transportation bill.

He'll start in Bridgeview, meeting with Illinois Transportation Secretary Gary Hannig, Rep. Dan Lipinski, D-Chicago, and other state and local officials. They will discuss the Create project to reduce freight rail bottlenecks and the Central Avenue Bypass, which would connect that road to Narragansett Avenue under railyards in Bedford Park.

...

---------------------------

How do you connect Central with Narragansett ... aren't they a mile apart?
Wouldn't it make more sense to build an underpass for one of those streets under the railyards (I'm assuming nothing exists there yet) ?

the urban politician Mar 28, 2009 1:31 AM

^ of all things you're emphasizing a road connection in the suburbs? I am far more interested in any rail invesment

denizen467 Mar 28, 2009 3:29 AM

To be fair, this is hardly a suburb - it's basically adjacent to MDW.

I think the issue must be that the railyard there, one of the few biggest in the world, is about 3 miles long and creates a 3-mile east-west barrier where north-south traffic must go around it. (Again, I could be wrong and maybe there is some sort of way through it currently.) Maybe they feel a need to connect the MDW area to Bedford Park / Burbank. I have no idea though. I too would prefer rail projects (like, in that area, a big Orange Line extension to Toyota Park).

whyhuhwhy Mar 28, 2009 2:10 PM

Quote:

Originally Posted by the urban politician (Post 4164096)
^ of all things you're emphasizing a road connection in the suburbs? I am far more interested in any rail invesment

Hardly a suburb. Have you driven around that area? A Central Avenue bypass through that 3-mile long railyard would be great and has been in planning since the 70's. Cicero and Harlem are about as choked as they get.

nomarandlee Mar 28, 2009 3:19 PM

Quote:

http://www.chicagobusiness.com/cgi-b...gobusiness.com


Transit groups bash Quinn's capital plan
Posted by Greg H. at 3/27/2009 12:09 PM CDT on Chicago Business

Gov. Pat Quinn's proposed big capital plan is getting a big raspberry from a coalition of influential Chicago civic groups.

Echoing private gripes by public-transit leaders, the coalition says the governor's plan does too little to help the Chicago Transit Authority, Metra and other transit operators deal with years of deferred projects to repair train lines, buy new buses and handle other infrastructure needs.............
..

jpIllInoIs Mar 28, 2009 8:38 PM

Quote:

Originally Posted by denizen467 (Post 4164242)
To be fair, this is hardly a suburb - it's basically adjacent to MDW.

I think the issue must be that the railyard there, one of the few biggest in the world, is about 3 miles long and creates a 3-mile east-west barrier where north-south traffic must go around it. (Again, I could be wrong and maybe there is some sort of way through it currently.) Maybe they feel a need to connect the MDW area to Bedford Park / Burbank. I have no idea though. I too would prefer rail projects (like, in that area, a big Orange Line extension to Toyota Park).

Folks, the CREATE Road projects ARE Rail projects. The are building Road/Rail grade seperations and that is good for rail, including freight, Amtrak, Metra and CTA since buses will be using the underpass.

left of center Mar 28, 2009 9:21 PM

Quote:

Originally Posted by the urban politician (Post 4164096)
^ of all things you're emphasizing a road connection in the suburbs? I am far more interested in any rail invesment

You have no idea how much congestion the Bedford Park rail yard creates along Cicero and Harlem Avenues. This very much affects the Chicago neighborhoods of Garfield Ridge and Clearing. Take Cicero from 55 south past Midway during rush hour. Its a nightmare. All north-south traffic between those neighborhoods and locations south of Bedford Park have to funnel onto either Harlem or Cicero. Its been a problem now for years. I for one (originally from that area) am very excited at the prospect of the oft talked about Central Ave viaduct finally getting somewhere politically...

Chicago Shawn Mar 28, 2009 9:26 PM

Quote:

Originally Posted by jpIllInoIs (Post 4165114)
Folks, the CREATE Road projects ARE Rail projects. The are building Road/Rail grade seperations and that is good for rail, including freight, Amtrak, Metra and CTA since buses will be using the underpass.

Not really in this case, because the "road" does not exist here. This is a new segment that would be built under the rail yard. Both Cicero to the east and Harlem to the west are grade separated as well (overpasses). I agree that this is needed (very needed, Cicero is already six lanes wide and jammed); but I would not call it a CREATE priority project, as it does nothing to improve rail safety and/or efficiency.

I wonder though if the reporter may have not gotten the story right. Connecting Narragansett to Central through the yard does not make a lick of sense. Central should just be punched through, as it is an arterial street on both sides of the yard. Narragansett is a mile further west and is a collector street on both sides of the yard, and is in fact discontinuous to the south (A public park is in the way).

ardecila Mar 29, 2009 2:24 AM

Quote:

Originally Posted by Chicago Shawn (Post 4165157)
Not really in this case, because the "road" does not exist here. This is a new segment that would be built under the rail yard. Both Cicero to the east and Harlem to the west are grade separated as well (overpasses). I agree that this is needed (very needed, Cicero is already six lanes wide and jammed); but I would not call it a CREATE priority project, as it does nothing to improve rail safety and/or efficiency.

I wonder though if the reporter may have not gotten the story right. Connecting Narragansett to Central through the yard does not make a lick of sense. Central should just be punched through, as it is an arterial street on both sides of the yard. Narragansett is a mile further west and is a collector street on both sides of the yard, and is in fact discontinuous to the south (A public park is in the way).

The city has planned for awhile to build an overpass at Central Avenue, and a long-term plan also included one at Narragansett. Building an underpass, however, makes absolutely no sense to me. They would have to tear up every track in one of the nation's biggest and busiest railyards to build something underground. The cost would be massive! :koko:

ardecila Mar 29, 2009 2:51 AM

Quote:

Originally Posted by Chicago Shawn (Post 4158547)
^Awesome information. Thanks for that informative post Mr. D.

I find it particularity interesting that Ohio was chosen as a through route connection. Who would have thought just 40 years later that it was used for the same purpose, but with an entirely new mode of transportation.


*If* the West Loop Transportation Center ever becomes a reality, then Union Station will get a minimum of two new through-tracks under Clinton Street. I would imagine this would be built in conjunction with a new CTA Clinton-Larabee subway, as they would be stacked together vertically under the street. It will be ridiculously expensive to construct, but I personally believe the benefits would be worth it. Union Station right now is at capacity during AM-PM peak. Those new tracks would certainly be used frequently between Metra and Amtrak, which would no longer be forced to back trains out of the station and could do a St. Louis to Milwaukee Route and so forth. There has been a right-of-way easement preserved in K Station to allow for the future decent down to the subterranean through-route tracks that would be built under Clinton.

A far cheaper option would be to build a connector at 75th Street that redirects the SouthWest Service into LaSalle St Station.

Then, you could free up some capacity at Union Station and connect some of the stub tracks, creating 2 new through tracks (the columns of Gateway Center 3 allow this, from what I hear).

You could even revive the Van Buren Street tunnel under the river and turn it into a pedway connecting Union and LaSalle Street Stations - with moving sidewalks, airport style, to allow the trip to be made in minutes.

All this for maybe $200 million, instead of the billions that the West Loop Transportation Center would cost.


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