Much like property tax increases, CTA fare hikes are the third rail of Chicago politics. Mayor Rahm Emanuel hasn’t gone near it, though he did raise the cost of some CTA passes.
Now, the Regional Transportation Authority that must approve the CTA budget is turning up the heat on the Emanuel-controlled CTA board to do the unthinkable for a mayor gearing up for what’s expected to be a difficult re-election bid.
In a Nov. 8 letter to CTA President Dorval Carter Jr., RTA Executive Director Leanne Redden warns that the preliminary CTA operating budget submitted to the RTA Oct. 23 “did not offer clearly identifiable and reliable revenue streams” to close a $33 million budget gap.
The shortfall was triggered by a state budget that includes a permanent, 2 percent sales tax surcharge and a 10 percent reduction in public transportation funds in the next fiscal year. Redden also cites slowing sales tax growth.
“Over the last few budget cycles, the RTA Board has expressed concerns that, unlike other major urban transit agencies, CTA has not raised its base fare since 2009,” Redden wrote.
“Fare increases, while onerous, are the most reliable way to generate revenue and achieve the CTA and regional recovery ratios [requiring 50 percent of revenues to come from fares]. As such, the RTA strongly encourages the CTA to implement a fare increase for 2018 sufficient to bring the preliminary operating budget into balance.”
Redden noted that Emanuel plans to raise ride hailing fees — by 15-cents-a-ride next year and another nickel in 2019 — to bankroll $180 million in CTA capital improvements. The fee is expected to generate $16 million the first year and $21 million the second.
But, she wrote: “because it is a new revenue source, it may not generate sufficient revenue to resolve CTA’s budget gap. Moreover, the stated plan is to dedicate this revenue to capital. While investment in capital is critical, CTA needs to address the operating deficit at this time.”
Redden closed with a warning about the mass transit equivalent of the “nuclear option” — withholding 25 percent of the CTA’s operating funding if the CTA fails to present a budget that meets the state-mandated recovery ratio.
“This equates to an annual reduction of approximately $360 million of regional transit funding, resulting in immediate service disruptions. None of us want to go down that path,” Redden wrote.
Emanuel’s communications director Adam Collins issued an emailed statement in response to the RTA pressure. It ruled out service cuts, but left the door open to a fare hike.
“The Mayor has made it clear to the CTA leadership to look under every couch cushion for any additional savings because, while it’s been eight years since the last fare increase increase, service cuts are off the table,” Collins wrote.
CTA spokesman Brian Steele said fare hikes and service cuts are “options of last resort” and the CTA is “looking at every alternative” before finalizing its 2018 budget.
“The state’s reduction of $33 million in funding toward CTA’s operations presents an unprecedented challenge,” Steele wrote.
Earlier this week, Chicago aldermen applied their own pressure for a CTA fare hike while pushing back hard against the idea of giving the CTA a “blank check” without oversight.
CTA chief of staff Sylvia Gomez assured them that fare hikes, service cuts or a combination of the two were “on the table” to close the $33 million gap.
RTA Board Chairman Kirk Dillard has developed a close working relationship with Emanuel.
Dillard is well aware of the political implications for a mayor who has already imposed nearly $1.1 billion in property tax increases; a 29.5 percent tax on water and sewer bills and a pair of telephone tax hikes to solve Chicago’s $30 billion pension crisis.
But Dillard said “cuts have consequences” and “it’ll be tough” for the Emanuel-controlled CTA board to close the $33 million gap without raising fares — even with the influx of ride-hailing revenue.
“We always discourage using capital funds [for operating], since they have a backlog of capital needs that could choke a horse,” Dillard said.
“There are very few entities as well run as the CTA to not have any type of increases for eight or nine years. That’s a credit to CTA management that they’ve been able to stave off any increase in fares. That’s pretty remarkable. [But] they do have to meet the statutory recovery ratios. That puts a lot of pressure on them.”
Dillard credited Emanuel for making “great physical enhancements” to the CTA as well as track and switching improvements that riders don’t see, but nevertheless, speed their daily commute.
“Most transit riders, if you show them they’re getting something for fare increases, generally understand the necessity to raise fares every decade or so,” he said.