Regional Transit Needs New Funding to Meet $20 Billion Backlog

Red South Reconstruction - Sep. 17, 2013
The Regional Transportation Authority estimates $20 billion is needed to clear the transit infrastructure maintenance backlog. Photo: CTA

Transit systems in Northeastern Illinois face a $20 billion maintenance backlog. Now the question is how to pay for it.

Governor Pat Quinn’s Northeastern Illinois transit task force has shown some of the possibilities at the region’s disposal, but hasn’t staked out a position on how to secure the necessary revenue to keep Chicagoland’s track, trains, and buses from sliding into disrepair.

All told, the Regional Transportation Authority estimates that $20 billion is necessary to bring existing transit infrastructure into a state of good repair, with an initial five-year outlay of $4.7 billion called for in its capital plan. Expanding service will require funding in addition to meeting those maintenance needs.

The transit task force highlighted 12 funding sources used by national transit agencies and reviewed many short-term financial options “common in the private” sector. New funding sources could include fuel taxes, a broader sales tax that covers services, a payroll tax, land development charges, and parking fees. However, the task force stopped short of recommending new funding sources for the integrated transit agency it proposes.

The task force analyzed regional transit’s existing funding, noting how reactive the transit agencies’ financial planning has been. “The region,” the task force writes, “lacks a strategic financial plan for transit that does more than show funding gaps based on the status quo.” The agencies don’t work together, so there’s no “coordinated planning for investments to increase or improve inter-system connectivity.” CTA, Metra, and Pace have a “natural desire” to “minimize RTA oversight” and choose priorities independently — or not choose at all, as Metra has done since 1992 by not adopting a capital plan.

Currently, highway and transit projects are partially funded by state and federal fuel taxes, levied in cents per gallon of gas or diesel sold. However, both taxes are in decline as gas sales slip; the federal Highway Trust Fund will again run out of money this summer. A new fuel sales tax would instead tax the final purchase price, at a set percentage. The report calls it “easy and inexpensive to implement and administer,” but could push drivers to buy gas outside the area, or switch to electric vehicles.

The report specifically warns against continued reliance on federal gas tax grants, which paid for a quarter of Chicagoland’s transit construction projects between 2002 and 2012. “At best,” the task force writes, “future federal funds for transit will stagnate, at worst they will decline.”

“Land development charges” could capture for transit the “increased land values resulting from the availability of high quality public transit.” TIFs, or tax increment financing districts, are one such strategy that Chicago has used to build new CTA stations like the Wilson Red Line station.

“Impact fees” are another option. These are usually charged to developers to pay for road modifications, like new traffic signals. Since both the GO TO 2040 plan and the task force prioritize developing jobs and residences near transit, perhaps a new impact fee could charge those developers who don’t build near transit.

The City of Chicago, like other municipalities, already charges taxes on paid parking lots, but doesn’t dedicate the revenues to transit. A parking levy would be a special property tax on workplace or retail parking spaces. This program could be especially effective at reducing driving, and could build a constituency for convincing municipalities to reduce or eliminate costly developer parking requirements.

The report also recommends the continued enforcement of existing sales tax collection laws, whereby RTA sues companies and municipalities that skirt the sales taxes that currently fund regional transit.

The task force calls attention to one funding strategy that appears unsustainable: “toll credits.” These are points that RTA or Illinois earns towards reducing the upfront, 20 percent local match needed to receive federal grants that cover 80 percent of the project cost. When Illinois Tollway collects more tolls, Illinois earns more toll credits, which RTA and other agencies can redeem to speed up project approval and their federal reimbursement checks. The transit agencies are still on the hook to to find the 20 percent in local funds — or else risk stalling construction. Toll credits can “buy the locals time to scrape the match together while they get the project started at present construction costs,” says Metropolitan Planning Council vice president Peter Skosey.

In the report, the task force recommends dropping the existing but arbitrary formulas that divide RTA’s sales taxes between CTA, Metra, and Pace, and instead use performance-based distribution. These formulas were set up back in 1974 to return revenues to individual counties, “but by nature, transit crosses jurisdictions, modes, and service boards,” and the formulas haven’t responded to “changes in ridership, population, or investment needs.”

Today’s unreliable funding sources — like the sales tax, which rises and falls with the economy — also require short-term funding fixes. The task force report lists myriad short-term financial options that “would serve to reduce the magnitude of any funding shortfall” for the transit agencies. These include spending money on “investments with the greatest regional value,” a principle embedded in the regional plan but ignored by the Illinois Department of Transportation’s expensive highway-expansion dreams. Another option is to “encourage competition,” allowing the private sector to compete to provide transit service and make capital investments.

A new, unified transit agency, along with better management and revised allocation formulas for existing revenues, could help to overcome public distrust that “makes it very difficult to raise new revenues.” The RTA and three service boards can use this report to start making changes now, but it’s up to legislators and the governor to enact long-term changes.

  • No Ur Fax

    Politicians have no incentive to think long term, hence any long term funding like transit, pension, etc gets ignored in favor of more short term projects that attract voters.

  • Another model for financing public infrastructure is the use of special districts, which are proven to be a stable and efficient source of income for government entities.

    http://www.lorman.com/live-webinar/393260?p=17934

  • I can’t see the details of that webinar, but we use TIF (Tax Increment Financing) districts to collect money on growing property tax revenue and divert them to special funds that can only be expended in that district.

    This money is frequently used to rebuild Chicago Transit Authority stations, fix their bus garages, and pay the local match for our federally-funded Divvy bike-share system.

ALSO ON STREETSBLOG

How Can Chicagoland Fix Its Regional Transit System?

|
In the wake of the recent Metra patronage scandal, the Regional Transit Authority has come under intense scrutiny. Many journalists, elected officials and policy experts have argued that the current system of separate boards for the CTA, Metra and Pace, overseen by the RTA, lends itself to interagency competition and corruption that gets in the […]

CMAP Plan Update Includes Sobering Look at Region’s Funding Shortfall

|
The Chicago Metropolitan Agency for Planning’s GO TO 2040 regional comprehensive plan has weathered some major ups and downs in its four-year lifespan. CMAP has received several awards for the plan, which required a huge effort on their part to reach out to local residents and overwrite decades of uncoordinated transportation “plans.” Last year, though, the […]

Three Transit Campaigns: Do They Compete or Complement Each Other?

|
As the Chicago region grows in population, we’re going to need to provide efficient and affordable transportation options in order to compete in the global economy, and that’s going to require more and better transit. People who live near transit pay less in transportation costs as a portion of their household income, and have better access […]

More State Control Over Chicagoland Transit Is a Bad Idea

|
On Tuesday, the Northeastern Public Transit Task Force, created after former Metra CEO Alex Clifford’s abrupt resignation and the ensuing severance package scandal last summer, issued four different options for restructuring regional transit governance [PDF]. While there’s a lot of variation among the four options, they would all hand more power to the governor. This is […]
STREETSBLOG USA

The Looming Transit Breakdown That Threatens America’s Economy

|
While federal transit funding stagnates, the nation’s largest rail and bus systems have been delaying critical maintenance projects. Without sustained efforts to fix infrastructure and vehicles, the effects of deteriorating service in big American cities could ripple across the national economy, according to a new report from the Regional Plan Association [PDF]. RPA focuses on ten of the nation’s largest transit agencies […]

Final State Task Force Report Dives Into Transit Reform Details

|
Governor Pat Quinn’s northeastern Illinois task force released its final report [PDF] yesterday, detailing recommendations from its mid-March draft. The task force launched last year, after former Metra CEO Alex Clifford resigned to protest the commuter rail operator’s long-running patronage culture. The task force of transit experts, business and union leaders spends most of the report writing about how […]