The quest to find a long-term funding fix for the Chicago region’s transit system began in earnest during the last month with Chicago area civic, planning, and business leaders on board.
With ridership slow to return after the COVID-19 pandemic, the region’s bus and rail systems face a $730 million fiscal cliff in 2026 when federal relief coronavirus relief funds run out.
A coalition led by the Chicago Metropolitan Agency for Planning — the Plan for Action for Regional Transit, or PART — began meeting in January to begin developing recommendations for state lawmakers.
The aim is to ensure the long-term financial viability of a coordinated regional public transportation system with proposals due to the General Assembly Jan. 1 under Public Act 102-1028.
The Illinois Regional Transportation Authority, which provides fiscal oversight of the Chicago Transit Authority rail and bus service, Metra suburban commuter trains, and Pace suburban buses, last week adopted its long-term strategic blueprint, “Transit is the Answer” that lays out fiscal, equity, and climate goals.
The two efforts are closely linked — the RTA plan will inform the coalition’s recommendations as will CMAP’s own Mobility Recovery project. PART’s goal also extends beyond overcoming the looming fiscal headwinds to cover governance and regional service with an eye on equity.
“We need big, bold solutions that can secure and strengthen the second-largest transit system in the country and continue to serve those who need it most, reliably and affordably,” CMAP Executive Director Erin Aleman said in a statement after PART’s Steering Committee’s first meeting last month.
CMAP was created in 2005 under state authorizing legislation to lead regional planning.
Near-term, the RTA’s service boards are grappling with lagging ridership numbers, an employee shortage, and — especially for the CTA — public safety fears that dampen the ability to lure back riders. Longer term, the service boards face a financial reckoning in 2026 after federal pandemic relief is exhausted.
The PART steering committee held its first meeting Jan. 18 and plans to convene four more times over the course of the year with three subcommittees charged with laying out plans for what the transit system should look like, how to pay for it, and how to implement the recommended changes.
The 27 panelists cover a broad range of stakeholders from the business community, environmental, labor, and civic sectors with public finance well represented.
Muni specialists include Carole Brown, Chicago’s former chief financial officer and public finance banker who also has previously led the CTA board and is now with PNC; and Mayer Brown partner David Narefsky. Justin Marlowe, a professor at the University of Chicago Harris School of Public Policy, and Deborah Carroll, director of the Government Finance Research Center at the University of Illinois Chicago, are also members.
The size of the looming gap, which equates to nearly 20% of operating expenses, underscores the depth of the strains as ridership remains far below pre-pandemic levels.
“This large of a structural operating deficit cannot be addressed solely through service cuts and raising fares, because the cuts that would be required would bring about significant disruptions to service, further inequity in terms of affordability and accessibility, and disproportionate impacts on lower-income individuals who rely on transit for essential travel,” Carroll said.
The anticipated service reductions needed to fill the 20% operating budget gap would likely be around 30-40% due to transit service having relatively high fixed costs, and the resulting impact would ripple through the region’s transportation network, posing new strains.
“This would inevitably contribute further to roadway traffic congestion, which now exceeds its pre-pandemic levels, while transit ridership has not fully rebounded, suggesting many riders have not come back to transit since the pandemic,” Carroll said.
“So, looking at both sides of the revenue/expenditure equation is necessary,” Carroll said. “Everything is on the table. We don’t want to have to do this again in 10 or 20 years, so any recommendations for change coming out of the steering committee are intended to produce long-term solutions.”
For Carroll, the subject hits home personally because she lives in the South Loop neighborhood and relies on public transportation after opting not to renew her car lease last June. “Other than being generally passionate about public transit, this project is giving us an opportunity to take a holistic approach to regional transit with the intention of making lasting, long-term changes,” she said.
“Transit is the Answer,” unveiled by the RTA late last year and approved last week by the board, provides a starting point for the PART group. The RTA describes the plan as promoting safe, reliable, accessible public transportation that advances equity and combats climate change with priorities laid out in areas of funding, safety, speed, and reliability.
The plan seeks to tackle issues on multiple fronts. Beyond financial fixes, it promotes the convening of a region-wide, cross-sector safety and security summit to come up with fixes for the crime issues, seeks funding to pilot an expanded regional free or reduced fare program for poor people, and looks for input on crafting a transit climate action plan that moves toward zero emissions for transit operations.
“The adoption of this plan represents a regionwide united front to meet the challenges facing transit head-on and to make crucial improvements to the system,” RTA Board Chairman Kirk Dillard said in a statement.
The RTA’s service boards received a $3.5 billion federal pandemic lifeline that has plugged budget gaps since 2020. Relief will help balance budgets through 2025.
The transit blueprint examines 27 revenue options and identified 11 potential fixes. “Their findings show that there is no simple or singular funding solution,” the plan says.
Potential revenue streams considered as fixes include an increase in the existing RTA sales tax levied on Cook County and neighboring counties, an increase in the state motor fuel tax, implementation of congestion pricing on highways into Chicago, and expanding the RTA sales tax to services that are now exempt.
Other ideas include a vehicle miles traveled tax on the number of miles driven in a vehicle to replace 5% of state motor fuel taxes lost by fuel efficiency, expanding the real estate transfer tax now imposed on city transactions to include the suburbs serviced by the RTA, raising vehicle registration fees, and increasing Illinois State Toll Highway Authority tolls to benefit transit.
Many of the options face roadblocks because they need other governmental bodies like the state and city to act.
Other options related to state funding include increasing the state public transportation funding match by 5% and eliminating a 1.5% surcharge the state keeps from RTA sales tax receipts.
The plan envisions cataloging capital projects and applying metrics that enhance accessibility, equity in the distribution of projects and enhancing spending in areas that traditionally have seen underinvestment, and promoting reduced emissions.
The RTA’s $3.58 billion budget is up 6% from this year reflecting nationwide trends in inflation, rising costs of goods and labor, and a labor shortage. The service boards are raising pay and bonuses to attract and retain workers. The budget relies on $657.8 million of system-generated revenue and $1.55 billion of sales tax revenue.
The budget includes no general fare increases in 2023. The service board budgets will draw $670 million from the federal well of $3.5 billion in COVID relief.
Total ridership surpassed 50% of pre-COVID levels over the summer and is expected to rise to 316.3 million in 2023, which is about 56% of the pre-COVID 2019 level. Metra’s budget assumes ridership at 47% of 2019 levels, Pace at 51% and CTA at 58%.
The RTA and CTA won upgrades from Moody’s Investors Service in May following the rating agency’s upgrade of the state government to Baa1 from Baa2. Moody’s raised the RTA’s $1.7 billion of debt to Aa3 with a stable outlook from A1 and the CTA’s $2.1 billion of senior lien sales tax bonds to A1 with a stable outlook from A2.
S&P rates the RTA at AA and stable and Fitch Ratings assigns its AA-plus rating and stable outlook.
S&P rates the CTA sales tax second lien A-plus and the senior lien AA and both get stable outlooks. Kroll Bond rates the CTA’s senior lien sales tax AA and the second lien AA-minus with stable outlooks.
The RTA’s financial troubles echo those seen across the sector. S&P Global Ratings revised its sector view on public transit to negative from stable for the coming year.
With transit, “there’s a lot of talk about a fiscal cliff,” S&P analyst Kurt Forsgren said in a recent webinar on the overall transportation sector. “Clearly we’re going to be watching how those operators are responding to the challenge and filling the hole left by fare revenues.”
S&P’s negative view on transit comes as operators spend down more than $70 billion in federal aid that propped up agencies as ridership plummeted during the pandemic. The key question for many operators is whether they’ll be able to find a replacement revenue as federal aid runs out, S&P said.
The CTA’s fiscal and operational problems due to employee vacancies, which have stung service reliability and driven complaints about dirty trains and buses, and concerns about crime levels, have featured prominently among issues debated in Chicago’s mayoral race. Incumbent Mayor Lori Lightfoot faces eight challengers on the Feb. 28 ballot. If no one candidate wins a majority, the top two will face each other in an April 4 run-off.
Candidates’ positions vary on how to fix the problems. Some suggest establishing a transit police unit within the Chicago Police Department or allowing the CTA to establish its own force and providing more social worker help for those struggling with mental health and homelessness who end up on transit.