There’s been a lot of talk about the infrastructure component of the proposed stimulus, and whether it’s too slanted towards roads, bridges and other aspects of our car-dependent transportation system. One complication is that, in order to make for effective stimulus, the infrastructure investments have to be “shovel ready”, that is, ready to start up almost immediately. My understanding is that this one of the problems (from a stimulus perspective) with high-speed rail. But what about metro and urban public transit? My experience has been that they are perpetually underfunded and starve for dollars for capital improvements. So, do transit authorities around the country have “shovel-ready” projects ready to go?

To answer this I asked my top-secret source inside the Chicago Transit Authority. Here’s what he had to say in full:

1. The funding mechanisms for transit are perverse–IL funds its transit systems’ operating budget through sales taxes and a small amount through real estate transfer taxes. The feds stopped providing operating support to transit systems in 1998. Roads are funded (again, generally speaking) w/gas tax. There have been attempts to realign this crazy situation with congestion pricing and other more equitable arrangements but nothing has come of it. And to recover federal capital dollars a state usually has to provide a state match (and sometimes a local match). IL, unable to pass a capital program since 1999, has recently forfeited much of the federal transit dollars it was to receive in the last transp. law.

2. Connections between operating funding subsidies (state/local/sometimes federal) and capital support (infrastructure) are key. For CTA, under law we have to recover 50% of our operating costs from our customers (it’s called the “recovery ratio”). Or, put another way, only 50% of our operating costs are subsidized by government. Houston, Denver, Phoenix all have much, much lower recovery ratio requirements (I think Houston is like 11%). Thus they can “afford” to build out there transit infrastructure because they know they will be able to recover the requisite operating costs through revenue. Having a new line that a system can’t “afford” to run is obviously not a good idea.

3. So simply dumping money into capital programs won’t solve the problem. First and foremost we need changes in how these systems are funded.

4. That said, CTA currently has about $7 billion in unmet capital needs just to get our system into a “state of good repair”–i.e. our bridges safe, our rolling stock upgraded, signal systems upgraded, etc. That’s not expansion, that’s not “improvements”–that’s just getting it into the shape it should have been in had capital support remained at appropriate levels. So the needs for us is huge. Put another way, we are $7 billion in the hole and it’s growing. The real cost to the region (and taxpayers) here is much larger. Congestion, land use, job creation, mobility, air quality all suffer (and conversely improve when transit is appropriately funded). The “death spiral” awaits–given teh recovery ratio, transit systems cut back service to meet recovery ratio requirements, thus fewer riders ride, thus systems have to charge more to pay for service, thus fewer ride, until no one’s left.

5. Add expansion plans, and we’re talking around twice that just for CTA. We have concrete, vetted expansion plans that are “shovel ready” (at least most of them are). I’m not an expert in the permitting/federal funding process, but my understanding is that roads are much, much easier to build from a regulatory standpoint. In an interesting twist on this, most new rail expansions in metro areas w/established transit systems are being done on toll road right of ways–see O’Hare Blue Line, DC’s Metro, for example. The Tollways have been so well supported that they are up and running and transit systems are begging to have access to their right of ways to expand. To me the “readiness” argument is bullshit.

6. Right now we cannot meet our ridership demand w/our existing capital infrastructure. We don’t have enough buses, trains or rail lines to meet it. So there is a real need. And of course we’d argue that not only can’t we meet it, but from a policy standpoint the region should make decisions that encourage even more transit ridership (like greater levels of subsidization for operating costs, so we can lower fares). Transit is a money losing venture if you look at money put in v. revenues generated. And it SHOULD be. If we asked our riders to pay the actual cost of a ride, we’re talking about $6 per ride. That is not only untenable, but exactly the opposite of how we should ask our customers to support us given the benefits we provide. We should find progressive funding mechansisms (congestion pricing) because the actual transaction for taxpayers and metropolitan regions continues to be one that greatly favors transit investment. Roads, on the other hand, are bad investments when looked at regionally.

7. We have had to steal from our operating budget to pay for critical capital work (basic safety work, etc.)–that, of course, further exacerbates the problem.

8 So this is all to say that from a policy standpoint, transit loses v. roads right now. From a funding standpoint, they lose. From a political influence standpoint, they lose (some say because most manufacturers of transit rolling stock–buses and trains–are no longer in US, which shouldn’t in itself be a problem). Transit is still viewed as a service for low income minority populations, and still viewed as a colossally bad investment given the high entry costs. Experience after experience,e expert after expert, has shown this to be bullshit, but roads still command the policy and political attention.

9. A recent trend to address all of this is to privatize systems’ capital resources—public private “partnerships”. This to me is a story that is dying to be written. Who is the most important person in Chicago City government? Next to the Mayor, I’d say John Schmidt (at Mayer) who is crafting and executing the wholesale selling off of any capital resource in Chicago that does (or could) generate revenue. Roads, parking meters, airports–transit is next. The merits of this trend are much debated out there, and most systems outside the US are privatized in some way (London being the most famous). I find this really, really corrosive and disturbing. The social contract is changing around here–we just expect our government to provide services into the very near future, no matter how they are funded, no matter how much they cost, no matter who is providing them, and no matter that the way they are funded is in fact eroding our ability to enjoy those services into the future. Giving up (that’s what it is) our crown jewels is not only the least creative and honest way to address the revenue crunch, but it is also giving up the most valuable resources we have. I fear that transit will fall victim to Schmidt and RMD’s strategy.