A Skyway Lift for the CTA?

Published November 3, 2004

Congratulations to Mayor Daley. His groundbreaking deal to lease the Chicago Skyway to a private toll road company for 99 years will bring $1.8 billion into city coffers. It is the first such deal in the United States.

But the city has an even more lucrative and pressing opportunity. The Chicago Transit Authority (CTA) is now in the midst of one of its frequently recurring budget crises. Unless more tax money is obtained from Springfield, suburban taxpayers, or suburban transit riders, CTA promises to make deep service cuts during the new year.

CTA’s record in recent decades has not been stellar. More than one-quarter of its riders have abandoned it in the past 20 years. Measured on a cost-per-passenger basis, CTA is spending $100 million more than it did 20 years ago, even after adjustment for inflation. CTA’s problem is not a lack of funding, but too much spending.

In 1998, my colleagues and I published a report for the Metropolitan Transit Association (MTA) on CTA costs. We described the potential to use what we now know to be Daley-Skyway type strategies to reduce costs and provide better service to riders and taxpayers. At that time, CTA bus costs were approximately 50 percent more than market rates–the rate that would be charged by private contractors selected through a competitive bidding process.

Our report was published, publicized, and ignored by CTA, which has shown far more enthusiasm for taking money than taking available steps to solve the problem.

The private sector is now used by major public transit systems around the world. London now competitively contracts virtually all of its bus service–a system with four times the number of buses run by CTA. Costs there have been reduced 50 percent, after adjustment for inflation. The London transit authority continues to establish fares, routes, and service standards. The same red double-decked buses take passengers throughout the city … but service is better, on-time performance is better, and service levels have been increased more than 30 percent.

Similar conversions to competitive contracting have occurred in Copenhagen and Stockholm in Europe and Perth and Adelaide in Australia. The European Union is now finalizing regulations that will require conversion to competitive contracting for most European transit systems.

The opportunity that was missed by CTA in the late 1990s still exists. Based upon the model developed for the MTA study, I estimate competitive contracting could save nearly $1 billion over 10 years, and more than $3 billion over the next 25 years. These long-range savings are very substantial. The Skyway lease gain of $1.8 billion for 99 years could be achieved at CTA in less than 25 years.

Perhaps most surprisingly, these savings would be achieved without requiring the layoff of a single CTA employee. The conversion could be conducted gradually, within the natural employee attrition (retirement and resignation) rate, so present employees would lose nothing.

The alternatives suggested by CTA could not be more wrong. CTA is unsustainable in its present form. Any new infusion of taxpayer funding would simply postpone the structural reforms that are necessary for CTA to reverse its decline. Taking money from suburban operations will require higher Metra fares and could force service reductions. This will make the Loop less attractive for businesses and employees … and that cannot be in the best interests of Chicago in the longer run.

It may be time to put the CTA on the same track as the Skyway.

Wendell Cox ([email protected]) is a senior fellow of The Heartland Institute; a consultant to public and private public policy, planning and transportation organizations; and a visiting professor at a French national university. http://www.demographia.com.