1 Letter from the President Dear CTA Customers: For over 60 years, the CTA has provided the critical mass transit arteries to carry people throughout Chicago and 40 suburban communities. Whether moving people to work or play, our trains and buses facilitate easy interaction between the suburbs, city neighborhoods, and downtown. With more than 1.6 million rides on CTA buses and trains on the average weekday, including 250,000 throughout the downtown area, we know that every moment of every day people are depending on the CTA for their transportation needs. The CTA is a great transit agency with a great history. But like many governments and businesses, it faces extraordinary financial challenges requiring immediate attention. Since 2008, the CTA has borrowed more than $554 million to cover the cost of day-to-day operations. These loans helped the CTA through difficult economic times, but provided neither a solution to the root causes of the agency’s financial instability nor a long-term plan to make the CTA solvent. As a result, fare hikes in 2009 and deep service cuts in 2010 only temporarily eased the CTA’s financial pressures. We are confronted by costly collective bargaining agreements with inflexible work rules, an inadequate funding formula that hurts the CTA, and a faltering economy. Despite eliminating jobs and fostering management initiatives to improve efficiency, we are facing a record budget deficit. Absent fundamental reform, including an end to cumbersome union work rules, the agency’s longstanding structural financial imbalance will remain, with the consequence of a new downward spiral of layoffs, service reductions, fare hikes, and lost ridership. But with leaner and better management, labor reform, and aggressive service improvements, we can permanently fix CTA’s finances, preserve good jobs, increase ridership, and invest in our future. In five months, our administration has cut hundreds of positions and launched aggressive management efficiencies, saving tens of millions of dollars. The result is a lean management structure, with an average of 21 front-line staffers for every manager, and the smallest number of employees in the CTA’s history, with 25 percent fewer employees than a decade ago. We have also launched innovative new initiatives to improve the rider experience and encourage new riders and revenue. To improve security, we added more police and thousands of new security cameras. To improve the convenience of our customers, we are rolling out Bus Tracker technology at our bus shelters to let passengers know exactly when their bus is coming. To improve the cleanliness and aesthetics of our rail stations, we launched the “Renew Crews”—SWAT teams of tradespeople to deep clean, repair, and improve more than 100 of our stations and subways. We’re securing hundreds of new rail cars with modern technology and passenger amenities. And many more improvements are underway. But even the most innovative service and the leanest management cannot make up for an embedded cost structure that far exceeds the national norm—mostly driven by antiquated work rules that benefit a small number of individuals at the expense of everyone else. Our challenge is to work with our employees, and their respective unions, to move the CTA’s methods of operation from mid-century to the 21st Century. Together, we can reform and renew an agency central to regional economic growth and the quality of life in our neighborhoods. Forrest Claypool 2 Organizational Chart This is an organizational chart of the Chicago Transit Authority. The Chairman of the Board and Board Members are at the top of the chart. Under the Chairman are the President and Chief of Staff. The Office of the Inspector General is between the Chairman of the Board and the President. Nine branches are under the President, as follows: The first branch is Legislative Affairs. The second branch has Planning at the top, with Strategic Planning, Business Development, and Grants below. The third branch has Transit Operations at the top, with Bus Operations, Rail Operations, Bus & Rail Maintenance, Control Center, and Scheduling & Service Planning below. The fourth branch has Infrastructure at the top, with Power & Way, Facilities, and Engineer below. The fifth branch has Administration at the top, with Human Resources & Employee Relations, Purchasing & Warehousing, Technology, and DBE/EEO/ADA Compliance below. The sixth branch has Finance at the top, with Comptroller, Budget & Capital Finance, and Treasury & Revenue Collection below. The seventh branch has Law at the top, with Corporate Law & Litigation, Labor Policy & Appeals, Torts, and Claims below. The eighth branch is Communications. The ninth branch has Safety & Security at the top, with Compliance below. 3 Executive Summary Overview Since 1947, the CTA has been the essential link in a large metropolitan area by providing public transit services that move riders throughout the city and suburbs. CTA’s mission to deliver quality, affordable transit services that link people, jobs and communities is simple but vital. But the agency is also faced with epic financial challenges—union contracts with guaranteed wage and benefit increases and costly work rules, inadequate public funding, and heavy pension obligations. Despite eliminating jobs and implementing management initiatives designed to make our agency more efficient, we are facing a $277 million deficit in 2012. Change at every level will be required to address this issue. Looking ahead to 2012, we must embrace a wide range of solutions to make up for the difference between public funding and revenues, and what it costs the agency to maintain service. The most significant change must come from union work rule changes. Nearly 91 percent of the CTA workforce is unionized and labor expenses alone account for approximately 70 percent of our costs annually. Combined with dramatically escalating pension and health care mandates, and the highest cost-adjusted rail and bus operator salaries in the nation, the union labor costs and expensive work rules have become unsustainable. Union workforce labor costs have far outpaced our counterparts in other metropolitan areas, and tightly restricted work rules in union contracts have prevented the CTA from making any significant cost reductions and efficiencies for its largest labor force. As we work through these many challenges, we know that mass transit can help create more jobs, stronger neighborhoods, improve property values, and provide a better quality of life. But these benefits of a vibrant, modern transportation system will not be possible if we simply carry on as we have in the past. Working with everyone, from all of our employee ranks, to our vendors and our government and not-for-profit partners, we intend to do business in a different way—one that is more rational, fair, and innovative, and that recognizes that we must now make the difficult changes to provide the best possible transportation options for the people in our great city and metropolitan area. Even as efforts to contend with the agency’s financial constraints continue, enhancements to service and operations moved forward in 2011 and will continue to do so in 2012. Following are some of the highlights. Management Efficiencies Because of the severity of the agency’s financial situation, a full and thorough assessment of management and operations was the first order of business. By reorganizing and streamlining, the agency was able to realize immediate savings with no adverse effect on the current level and quality of service provided to customers. In June, we eliminated 51 non-bargained positions, including 26 manager-level positions. CTA is saving approximately $7.6 million in salaries and benefits—a 10 percent reduction in senior management. Additional savings of $900 thousand in labor and benefit costs are being achieved by delaying hiring for open positions that have been deemed necessary. A reduction in materials, utilities and contractual services expenses are further reducing costs for 2011, with a result of $15 million in annual savings from CTA’s operating budget. These reductions were followed in early October by the elimination of additional positions in 2012, for a total of 200 fewer positions. The elimination of unnecessary and duplicative positions will save the CTA approximately $22 million annually and the sick and vacation leave policy changes will save the agency an estimated $15 million over the next six years. Roughly two-thirds of the cuts will come from filled positions. As part of these cuts, a number of senior-level positions have been eliminated, including vice-presidents, general managers and directors. The leaner management structure averages 21 front-line staffers for every manager. In addition, the CTA now has the smallest number of employees in its history, with 25 percent fewer employees than a decade ago. We expect savings to be generated in 2012 by revisions to the agency sick and vacation policies for non-bargained employees. Among the changes to the sick and holiday leave policies are: • Elimination for non-bargained employees of the floating holiday policy and birthday and anniversary days off. This will end the decades-old practice of granting employees days off on their birthday and employment date anniversary. Non-bargained employees will accrue sick time at a rate of one half (1/2) day per pay period and will be able to earn up to 13 sick days per year with a maximum accrual of sick time of twenty-six (26) days. This replaces a policy of six months of sick leave for all non-bargained employees. • Female employees will be eligible to receive four (4) weeks of fully-paid leave after giving birth, while domestic/civil union partners and spouses will be eligible to receive two (2) weeks of fully-paid leave after the birth of a child. Adoptive parents will be eligible to receive two (2) weeks of fully-paid leave after the birth and/or placement of an adopted child. • Non-bargained employees will accrue vacation leave on an on-going basis at a rate based on years of service. Non-bargained employees’ vacation allowance will be capped at twenty-five (25) days of vacation compared to the current maximum of 35 days. • Pay for unused vacation days following separation from the agency will be capped at 25 days after December 31, 2012. Previously, non-bargained employees could be paid for up to 88 days. • Employees will no longer be able to buy back unused vacation days. In addition to these efforts, in 2012 CTA will aggressively pursue efficiencies throughout the organization, including the following areas. Workers’ Compensation CTA expenditures on workers’ compensation claims have steadily grown since 2008. While the number of claims has decreased, the average cost per claim has grown over 50 percent in that timeframe. Costs for CTA in 2011 are estimated to be $53 million, an increase of $16.5 million in four years. CTA will undertake an extensive review of our workers’ compensation process and monitor claims, aggressively pursuing any that are deemed questionable. Supply Chain Each year, the CTA spends millions on supplies yet a considerable amount in inventory sits on shelves, unused. Our distribution system lacks sufficient management controls to effectively ensure that scarce capital dollars are not wasted. Our processes are manual and labor intensive, resulting in a slow, inefficient system. CTA will review our policies, procedures, and spending patterns to develop a supply chain system that is responsive, efficient and cost-effective. Information Technology CTA’s information technology systems are fractured, non-integrated and must be replaced in order to achieve the maximum use possible. In the past, departments have made technology purchases without the benefit of an agency-wide plan that would ensure disparate systems are able to communicate with one another. In 2012, the CTA will undertake a comprehensive analysis across the organization to identify and document current processes to develop a future state plan to bring CTA’s technology into the 21st century. Absenteeism The CTA incurs tens of millions of dollars each year in absenteeism-related costs. Unscheduled days that are 2.5 times the industry standard require excessive overtime expenditures. CTA will undertake an aggressive program of training and accountability to lower absenteeism and discipline employees who are serial abusers of time-off policies. More importantly, we will also seek to end union work rules that effectively bar the termination of chronically absent employees. Training CTA’s greatest resource is its employees. But current training documentation is dispersed throughout the agency and its many garages, leading to confusion and inconsistency. CTA will revise its training program to standardize and track training and requirements to make sure that all its employees are properly credentialed and trained, for the benefit of both our workforce and our customers. By operating more efficiently, money is taken out of the bureaucracy and put into investments and service improvements. All of these early initiatives are designed to do more with less, while improving the safety and convenience of our customers, and the cleanliness and appearance of our buses, trains and facilities. Security The CTA is investing $10 million to hire 50 full-time police officers to patrol the rail and bus system across the city. The police officers will come from the Chicago Police Academy. Recruits are scheduled to begin their academy training in the fall of this year. They will go through six months of intensive training, with officers expected to be detailed to the Public Transportation Section by spring 2012. Currently, officers from the unit include both uniformed and plainclothes police who ride the trains and buses, and patrol stations. Adding these officers will increase the visibility of a police presence on the system and help to deter crime. This change to the policing strategy is a long-term investment for riders. Technology also plays an important role in the CTA’s security efforts. In June of 2011, the agency announced plans to double the number of security cameras at stations and expedite their installation, providing increased security for passengers and more assistance to police. By the end of 2011, more than 3,500 security cameras will have been installed at 143 rail stations. The intention is to saturate the system with cameras so that potential criminal activity is recorded no matter where it occurs. Images captured from CTA security camera footage have been used by police to solve both CTA-related crimes and crimes that occur in the vicinity of CTA buses and rail stations. Each camera records events and also provides a live feed to the CTA Control Center and the city’s Office of Emergency Management and Communications (OEMC). In 2012, we will continue to enhance the security infrastructure of CTA. The new 5000 series rail cars will arrive already equipped with multiple cameras. Retrofitting the existing fleet will be a multi-year process but will vastly enhance the agency’s ability to capture images to share with law enforcement. Federal Homeland Security funding will allow us to extend our camera network into rail yards. Station Renewal Public transit is a critical element in every neighborhood served by CTA and the Station Renewal program was created to make the experience of every rider the best it can be, providing a comprehensive facelift to 100 CTA rail stations over the next 12 months. The initiative, performed by work crews comprised of different trade workers—and called the Renew Crew—focuses on providing a top to bottom overhaul of station, creating a cleaner, brighter and more appealing station that improves the customer travel experience. By consolidating disparate trades that used to operate independently—on different schedules and at different locations, the station renewal program integrates supplemental specialized private trade contractors. These efforts are similar to a SWAT team approach to comprehensively address all the outstanding issues at a station at once – cleaning, repairing and improving rather than the piecemeal approach used previously. The first station to receive a renewal was the Logan Square Blue Line station. Logan Square, on the O’Hare Branch of the Blue Line, is in the heart of the Logan Square neighborhood and community area and opened in 1970. Upgrades to the station included repairs to masonry walls and concrete ceiling, refurbishment of the Kedzie main entrance and Spaulding auxiliary entrance escalators, deep cleaning and repainting the station’s interior, new signage and light fixtures, security camera upgrades, and planting new trees and greenery in the bus terminal and plaza. Details of the station renewal effort are featured on CTA web site so customers can view which station is receiving a renewal in addition to the next stations scheduled over a three week period. The web site also allows customers to provide feedback on the work completed. Bus Shelter Displays To increase the convenience for customers, this fall CTA unveiled the first of 400 LED signs to be installed at select JC Decaux bus shelters. The signs will provide customers with estimated arrival times via CTA Bus Tracker for the next four buses serving the particular location, and eventually important customer alerts affecting the respective route and affected routes at transfer points. These bright, easy-to-read signs display Bus Tracker estimated arrival times specific to the location of the bus shelter. The signs are being strategically placed at bus stops where a higher number of boardings occur, and also at busy transfer and connection locations. The LED signs are being placed on the sides of bus shelters and face outward to serve as many riders as possible – both those at the stop and within the vicinity of the shelter. The first 150 signs will be up by March 2012 and the remaining 250 by September 2012. The Chicago Department of Transportation (CDOT), which oversees the JC Decaux contract and maintains the public right of ways, will be the CTA’s partner in the operations and maintenance of the LED screens. CTA Bus TrackerSM & CTA Train TrackerSM In 2011, CTA Train TrackerSM was rolled out to customers following on the heels of the popular CTA Bus Tracker. Customers now receive estimated arrival times for the next train for all 143 rail stations across the CTA’s eight rail lines via the link to CTA Train Tracker on transitchicago. com. Estimated arrival times are generated through a combination of scheduling information and data collected by the software that monitors the signal system to indicate when a portion of track is occupied by a train. CTA Train Tracker calculates estimated arrival times by first measuring how long it takes a train to travel a portion of track, and then averaging the times of the last five trains to move across a portion of track. Riders can customize how they view their train arrival predictions by selecting the number of results that are displayed and how they are sorted—either by platform or route if the station is served by multiple rail lines, or by time of the next arriving train. Customer alerts are also integrated into the CTA Train Tracker website and notify riders to any planned events affecting rail service. Train arrival information is also displayed at 13 rail stations using existing electronic signs that are either on the platform or mezzanine levels. Stations with signs included in the pilot are: • Clinton, Ashland and California (Green Line – Harlem/Lake branch) • Lake, Garfield, Cermak-Chinatown and Jackson (Red Line) • Chicago (Brown/Purple Lines) • Fullerton and Belmont (Red/Brown/Purple Lines) • Halsted (Orange Line) • Polk (Pink Line) • UIC-Halsted (Blue Line) Bus Tracker has transformed the way Chicagoans perceive CTA bus service by taking the guesswork out of bus travel. Since its systemwide launch, arrival information is available not only on CTA’s web site, but on cell phones, web-enabled devices and via text message. By sending a text message to the CTA, customers can receive the estimated arrival times of the next two buses at a designated bus stop. With this feature, any customer with a mobile phone will have the ability to access Bus Tracker on the go. Open Fare System A new initiative in process will transform the way customers pay their fares. Over the last dozen years, the CTA has made many improvements to its fare payment system, evolving from tokens to magnetic strip cards to the current smartcard technology used in Chicago Cards. Smartcard technology was originally chosen because it was a good investment for the CTA. It streamlined the agency’s operations while increasing convenience for customers, a combination that supported the CTA operating in a fiscally responsible manner and delivering on the promise of providing a valuable and beneficial product for customers. Technology is constantly evolving. This is why the CTA is planning to move to contactless credit cards, debit cards and prepaid cards for riders. The final selection of partners on the project is expected to be completed by the end of 2011, with gradual implementation through 2012 and 2013. 5000 Series Rail Cars Following the successful completion of testing on each rail line, the CTA has funded and ordered 706 new rail cars from the first-generation Bombardier 5000-series. Each new rail car will be equipped with seven networked security cameras. But cameras are not the only new safety features. The new cars also include glow-in-the-dark strips on floors that outline aisles and doorways, and similar decals and signage to display emergency instructions. They also feature an event recorder system similar to a black box on an airplane, and door sensors that detect obstructions better than the CTA’s current rail fleet. The new cars also have enhanced features for people with disabilities, including those using mobility devices. Each rail car meets or exceeds current ADA compliance standards. This includes two wheelchair positions, more sensitive door sensors to detect obstructions, and text versions of audible announcements on LED displays for hearing impaired. There are several safety features on the new cars which include the ability for the rail operator to view the interior of each rail car and speak to the customers in that rail car via intercom. The Chicago Police Department will have remote video surveillance access and the CTA’s Control Center will be able to make emergency announcements and send text messages to the LED signs inside the train as well. Infrastructure Morgan-Lake Green/Pink Line CDOT is building a new elevated station at Morgan and Lake streets that will serve the Green and Pink lines. This area has seen significant residential and commercial development and a new station will provide direct access to and from the downtown area and the industrial/commercial districts. This is the first new CTA station to be built in more than 10 years. The new station will fill in a 1.3 mile gap between the existing Clinton and Ashland stations on the Green/Pink lines. The adjacent West Loop/Near West area has seen hundreds of new residential units and dozens of restaurants, retail businesses and nightclubs added to its landscape over the past decade. These businesses have joined long-established food suppliers and manufacturers that had given the area its reputation as an industrial corridor. When the project is completed, CTA customers will have a newly-accessible station complete with elevators, Braille signs, tactile edging and wheelchair turnstile for easier access to the station. Other amenities, such as security cameras, LCD information centers and a new public address system will make the facility state of the art. Purple Line Viaducts Work will begin this year to replace three viaducts along the Purple Line – at Greenleaf, Dempster and Grove Streets in Evanston. The project involves replacing the concrete viaducts with new steel structures, as well as new abutments, retaining walls, foundations, and new waterproofing and drainage systems. The project also includes rail tie replacement, new landscaping and lighting enhancements under the bridges. The viaducts are more than 100 years old and have deteriorated over time with exposure to the elements and train vibrations, leading to reduced speeds for Purple Line trains. Repairing the viaducts will remove the slow zones and allow trains to return to normal speeds. Loop Track Renewal Work on the second half of the Loop Track Renewal project will also begin this fall. Crews will replace deteriorated track and rail ties along the Wells and Van Buren elevated tracks. The project will replace track components that were installed in the mid-1980s and prevent the creation of new slow zones along the elevated line. In 2008, the CTA began work on replacing the signaling system within the Loop and also the first half of the Loop Track Renewal project. During this first phase of the project, crews replaced approximately 10,000 feet of track and deteriorated ties along the Lake and Wabash stretches of elevated track, resulting in the removal of nearly 600 feet of slow zones in the Loop. Portions of the Loop elevated system that will undergo renewal work in this next phase of work include the track and structure along Wells and Van Buren streets; the Hubbard Curve, which is located just north of the Merchandise Mart station and the Tower 18 and Tower 12 junctions, which are located at Lake/Wells and Wabash/Van Buren, respectively. The project also will include replacement of other rail system components including foot walks, traction power and signal cabling, signal panels, switch machines and rail lubricators. Track replacement work will prevent the implementation of slow zones in the near future for those areas where the track components have continued to deteriorate. With several hundred-thousand customers going into and out of the Loop each day, any delays encountered there would create a ripple effect and impact service along all other rail lines. Bus Rapid Transit The CTA, in coordination with CDOT, will experiment with Bus Rapid Transit (BRT) service on the Jeffery Boulevard corridor. Planning is also underway for potential full-service BRT express bus service on Western Avenue and in the Loop. Moving Forward In Chicago, transit is not simply an overflow outlet for those who would rather not drive; for many, it is . by choice . their primary mode of transportation. Transit plays a critical role in settings where land values are high and the space for new highway construction and associated parking needs, is significantly limited or non-existent. The CTA’s current infrastructure provides the most integrated blueprint for designing the future of the region’s public transit. It is the core system with the most potential for cost-effectively connecting to other public transit lines. Looking forward, enhancing CTA’s current infrastructure will provide the best results in regional efforts to reduce traffic congestion. The goal of everyone at the CTA is to advance the ongoing efforts to rebuild the system, improve the product offered to customers and deliver service that is on-time, clean, safe, courteous and efficient each and every day. But a robust, modern transit system is not just important to transit riders, it is important to the livability of the region and its ability to attract jobs and businesses. An investment in transit is an investment in the future of this region. Transit agencies today are facing a number of challenges, ranging from competition for limited funds due to the growing demand for new transit projects, tough competition for local sources to match federal funding requirements, and cost burdens associated with increasing safety and security responsibilities brought about by the security-enhanced environment in which we live. The region needs a viable public transportation network that will sustain its economic competitiveness, ensure flexibility in times of emergency, and support a healthy quality of life—and decisions should be made that support investment in this network. 4 2011 Operating Budget Performance Summary Introduction Despite the budget challenges facing the CTA, fares were not raised in 2011. In the fall of 2009, the Regional Transportation Authority (RTA) and the State of Illinois reached an agreement whereby the RTA would issue debt to provide an additional $83 million to the CTA in both 2010 and 2011. With this funding, the CTA agreed to hold fares constant for the same two-year period. In addition to holding fares steady, the CTA balanced the 2011 budget with no changes to service levels. The CTA’s budget, which was adopted on November 10, 2010 (“2011 budget”), relied on the effective management and efficient use of CTA resources. For the third consecutive year, non-bargained employees did not receive a wage increase. Throughout the year, management sharpened its focus on efficiency as it implemented a series of cost-cutting measures. The CTA reorganized and implemented spending cuts in June to save $15 million annually. Fifty-one non-bargained positions were eliminated, including 26 manager-level positions. None of these cuts impacted service or was safety-related. Approximately half, or $7.6 million, of the cost savings came from personnel reductions, including $900 thousand in savings achieved by instituting hiring delays and holding positions vacant for a longer period of time. Reductions in materials, utilities, and contractual services expenses accounted for additional savings as well. These spending controls allowed the CTA in September to announce a new initiative to enhance the customer travel experience. The station renewal initiative is designed to provide facelifts to 100 CTA rail stations over the next 12 months. The program focuses on providing repairs in a more systematic way than in the past, resulting in cleaner, brighter, and more appealing stations. 2011 ridership is projected to end the year slightly over the budget. Farebox revenues are projected to come in slightly above budget and public funding receipts are anticipated to exceed the budget as the economy shows small signs of a modest recovery. But even with all of this, the transfer of capital funds was also necessary to fund essential preventive maintenance activities and balance this year’s budget. Ridership The 2011 budget estimated systemwide ridership to be 521.8 million. The CTA currently projects that ridership will end the year at 524.4 million, or 0.5 percent above the budgeted estimate. When compared to 2010, 2011 ridership is forecast to be 7.5 million trips, or 1.5 percent higher. This reflects a decline of approximately 0.1 percent in bus ridership in 2011, and an increase in rail ridership of 3.7 percent over 2010. Average weekday ridership for 2011 is projected at 1.66 million per day, which is 20.5 thousand (1.2 percent) higher than 2010 weekday ridership. This is mainly attributable to a 3.4 percent increase in weekday rail ridership, which offset the decrease of 0.3 percent in weekday bus ridership. Average Saturday ridership for 2011 is projected at 1.08 million per day, which is an increase of 29.6 thousand (2.8 percent) from 2010 Saturday ridership. The 1.2 percent increase in bus ridership and the 5.3 percent increase in rail ridership drove this systemwide increase. Average Sunday/holiday ridership for 2011 is projected at 757.7 thousand per day, which is a 23.3 thousand (3.2 percent) increase from 2010 Sunday/holiday ridership. This was driven by the 6 percent increase in rail ridership and a smaller increase in bus ridership of 1.2 percent. Operating Expenses Operating expenses for 2011 are estimated to be $1.3 billion, which is $31.3 million less than the 2011 budget. The 2011 labor expense is projected to be $901.4 million, which is $66.3 million higher than 2010 actual labor costs due to previously negotiated wage increases and higher fringe benefit costs. Labor expense accounted for over two-thirds of the 2011 operating budget. On January 1, 2011, employees in the Amalgamated Trust Union (ATU) received another 3.5 percent pay increase, while employees in the Craft Coalition received increases in July consistent with the regional prevailing wage, both of which resulted in an increase versus 2010 spending despite savings relating to management efficiencies. The CTA continued to control and limit hiring in 2011 and implemented mid-year personnel reductions. In 2011, material expenses are forecast to be $67.9 million, which is $4.8 million (6.7 percent) lower than the 2011 budget. Targeted investment in the bus fleet has lowered the average age of the bus fleet and subsequently the budget for materials has decreased. Energy prices are a key driver of the CTA’s operating expenses. Fuel for revenue equipment is forecast to end the year at $58.2 million for 2011, $6.1 million more than actual spending in 2010. Fuel consumption in 2011 is forecast at 18.3 million gallons, reflecting a decrease of 940 thousand gallons (5 percent) versus 2010. The decrease in consumption is primarily due to the service adjustments of 2010, as well as to fewer special events in 2011. The sticker shock felt at the gas pump in 2011 by drivers across the country affected the CTA as well, although well-timed and strategic hedging safeguarded the agency from experiencing significant pain. Fuel prices in 2011 are projected to end the year at a net average price of $3.18 per gallon, which, while 17 percent more than the average price in 2010, is $0.26 below the $3.44 per gallon average market price through August 1, 2011. By April, the CTA had locked in enough fuel hedge contracts to cover 79 percent of total 2011 fuel consumption, a decision that helped to shield the agency from the impact of higher prices that began emerging in the spring. The CTA’s hedging program includes daily reviews of commodities markets and biweekly meetings with industry experts who offer hedging recommendations. With the help of its advisors, the CTA uses a long-term, layered fuel hedging strategy that will continue in 2012. For 2011, the cost of electric power for the rail system is forecast to be $30.2 million, which is $166 thousand higher than the 2011 budget. Costs increased as a result of higher power consumption, brought about primarily by the severe winter storms and frigid temperatures of early 2011. At the start of 2010, the CTA’s new electric power contract began. Under this contract, rail power is purchased using an actively managed block purchase approach which allows the CTA to purchase wholesale power for its base load electricity supply in advance. Electricity consumed above or below the block quantity is settled at the real-time ComEd locational marginal price (LMP). This approach yielded a blended rate of approximately $0.071 per kilowatt-hour in 2011. Provision for injuries and damages represents expenses for claims and litigation for incidents that occur on CTA property, as well as incidents involving CTA vehicles. This amount is determined by the CTA’s actuaries and is based on actual claims history and future projections. The 2011 forecast for this cost is even with the budget at $15 million. Security expenses are estimated to be $36 million in 2011. This is $1.9 million (5.5 percent) over the 2011 budget and $2.7 million over 2010 expenses. This increase was due in part to the augmentation of security personnel at bus garages and across the system in general. Security services consist of officers from the Chicago, Evanston and Oak Park police departments, as well as through contracts with private security firms. In addition to the CTA’s budgeted expense, the Public Transportation Section of the Chicago Police Department provides dedicated services to CTA customers at an estimated cost of $22 million, paid for by the City of Chicago. In July 2011, it was announced that, in partnership with the Chicago Police Department, 50 full-time police officers would be hired to patrol bus and rail stations across the city. The 50 officers are expected to begin the Chicago Police Academy in the fall of 2011. Upon completion of the Academy, these full-time officers will be detailed to the Public Transportation Section by spring 2012. This long-term investment in the safety of CTA riders will increase the CTA’s ability to provide customers with the most secure and convenient transit service possible. The other expenses category includes interest on pension obligation bonds, utilities, maintenance and repair, advertising, commissions, consulting, insurance, leases and rentals, and other general expenses. The year-end forecast for these services is $197.8 million, which is $2.4 million under the 2011 budget. Operating Revenues System-Generated Revenues System-generated revenues are projected to be $601.1 million, which is $11.1 million below budget and $7.1 million higher than 2010 actual revenues. Revenues from an RTA operating grant that previously were accounted for in other revenue have been moved to public funding, resulting in this decrease. The average fare paid in 2011, including cross- platform transfers, is projected to be $1.00. The reduced-fare subsidy is the State of Illinois’ reimbursement to the CTA, Metra and Pace for discounted fares given to people with disabilities and students. Revenue from the reduced-fare reimbursement is projected to be $28 million, which is even with budget. Advertising, charters and concessions revenues in 2011 are projected to be $19.4 million, which is $512 thousand more than budget and $3.2 million (14 percent) less than 2010. Despite the economic recession having a negative impact on advertising, the CTA projects an increase in contractual advertising revenues will help balance decreases in other areas. Revenue losses have been additionally offset by a net increase of concessionaires of 15 percent across the system. This sizable increase was due to streamlining the process by which the CTA leases its retail spaces, thus offering more amenities to customers. Investment income is estimated to be $394 thousand, which is $233 thousand (37.2 percent) lower than 2010 levels. Statutory required contributions will meet the budgeted amount of $5 million per the Regional Transportation Authority Act, which requires the City of Chicago and Cook County to contribute $3 million and $2 million respectively to CTA operations each year. Other revenues, which include parking fees, sale of real estate, rentals and sale of CTA merchandise, are projected to be $24.6 million, which is $11.2 million less than the 2011 budget and $3.8 million (13.3 percent) below 2010 actual revenues. Public Funding The public funding projected for 2011 is $574.1 million. This funding is comprised of sales tax, discretionary funding from the RTA, real estate transfer tax and federal capital money used for preventive maintenance funds. The 2011 projection reflects an increase versus what the RTA originally projected, which has resulted from sales tax across the region exceeding the budget. The CTA expects to continue to see positive effects in its public funding as the economy continues to stabilize in 2012. Included in the 2011 funding is the $83 million in proceeds received from the RTA in connection with the CTA’s agreement not to raise fares in 2010 and 2011. This additional funding of $83 million will not reoccur in 2012. Total Revenue (in thousands)