CTA 2004 PROPOSED BUDGET REMAINS FOCUSED ON SERVICE

October 9, 2003
10/9/03

Moderate Fare Increase Will Help Offset Reduced Funding

Chicago Transit Authority President Frank Kruesi today presented his budget recommendations for 2004. He proposed an operating budget of $936.6 million, which is an increase of only 1.3 percent over the 2003 budget and below the projected Consumer Price Index of 1.9 percent. CTA's actual expenses have remained below the rate of inflation for over a decade.

The 2004 proposed budget continues to build upon the momentum of the past six years, with programs and projects to help replace the aging infrastructure and provide quality service to CTA customers. For the past several years, the CTA has worked diligently to deliver on its mission while operating in an increasingly tough economic environment.

The weak economy has had a direct impact on the two major sources of CTA's operating revenue ? sales tax revenue and system-generated revenue such as fares. After five consecutive years of growth, ridership dipped this year and, with it, fare revenue, which accounts for more than half of CTA's annual operating revenues. System-generated revenues were $30.9 million lower than anticipated in 2003 and CTA projects minimal ridership growth in 2004. The other source of operating revenue is the public funding provided by the RTA. In 2004, the CTA's share is projected to be $11.9 million lower than it was in 2003.

"We have remained committed to service as our top priority, carefully managing our operations to reduce costs without sacrificing the level of service provided to our customers. Since 1998, the CTA has realized a total of $554.8 million in savings as a result of these efforts," explained Kruesi. "We have been able to avoid a fare increase for more than a decade while building an improved agency by way of better service, facilities, equipment and operations. But, as resourceful as we have been, our efforts have not been able to keep pace with the sustained sluggish economy and we are forced to face some difficult financial decisions."

At the start of the budget process last August, the CTA faced an operating shortfall of $88 million for 2004. Through a series of cost control measures and revenue enhancements, including reducing the work force by 400 positions over this year and next, staff was able to reduce projected costs by $58 million. After careful review of all the options, Kruesi said he is proposing changes to the fare structure in order to obtain the remaining $30 million. Among his recommendations is a 25-cent increase to the base fare?the first proposed increase to the CTA's base fare since 1991. In addition, he recommends reducing the price of a transfer from 30 cents to 25 cents, keeping the price of multi-day passes the same, and eliminating the 25 cent surcharge on express bus routes.

Kruesi said more than 70 alternative fare structures were considered and he recommends one that would generate adequate revenue and have a minimal impact on customers. Under the proposed changes the impact on customers would be:

23.3% of customers would have $0 increase (0%) in fare price.

13% of customers would have a 10 cent increase (12%) in fares price.

24% of customers would have a 20 cent increase (11%) in fare price.

39.7% of customers would have a 25 cent increase (17%) in fares price.

When all fare media, from cash, to cards, to passes is considered, the CTA's average fare currently works out to 82 cents a ride. With the proposed changes, it is expected it would to rise to 87 cents.

Kruesi said he was not recommending any reductions in service." We have worked very hard over the last six years to build up the quality and quantity of service we provide," said Kruesi. "I believe that service cuts lead to a downward spiral in ridership from which it is difficult to recover. CTA has gone down that path before."

The CTA projects a balanced budget as required by law. The Recovery Ratio, which measures the portion of operating expenses the CTA has to fund from revenues it generates, was set at 52.9 percent by the RTA.

Because the CTA is a service provider that operates 24 hours a day, every day of the year, labor expenses make up 74 percent of the CTA's operating expenses. Labor expenses are projected to grow at a modest 0.1 percent over 2003 due to a reduction in positions that will help offset wage increases and higher health insurance costs. Currently, the CTA is in contract arbitration with its largest labor union, ATU Local 241. The CTA has budgeted for an anticipated wage increase for those employees based on reasonable assumptions about the outcome of arbitration. That number is subject to change based on the arbitrator's decision. In addition, in 2004, the CTA will begin negotiating new labor agreements with all its unions.

"Balancing the budget was very challenging this year. Resources, which have always been limited, have become even tighter," stated Kruesi. "Nevertheless, the CTA expects to accomplish a great deal in 2004 and it will do so by being resourceful and innovative, while still carefully managing costs."

The 2004 budget proposal includes a capital improvement plan of $801.3 million, the CTA's largest capital budget ever. Projects include: the ongoing rehabilitation of the Cermak (Douglas) branch of the Blue Line; the Brown Line Capacity Expansion project; a request for proposal for the purchase of new AC (alternating current) traction motor propulsion rail cars; the mid-life overhaul of New Flyer buses and Flxible buses; the purchase of 2,500 new fareboxes; renovation of the Howard 'L' Station on the Red Line; rebuilding the Main Street viaduct in Evanston; a plan to rehabilitate and replace older escalators throughout the system; implementation of an integrated financial and administrative computer system; launch of the Chicago Card Plus; and CTA's relocation to its new headquarters.

The renovation of the Cermak (Douglas) branch of the Blue Line is on time and on budget. The Brown Line Capacity Expansion Project is designed to relieve congestion, meet anticipated increases in ridership, eliminate slow zones, and improve service delivery and passenger comfort. In addition, it will make the Brown Line accessible in accordance with the Americans with Disabilities Act (ADA) guidelines.

In 2004, a request for proposal will be released for the manufacture of new 'L' cars to be delivered in 2008. The new rail cars will use AC (alternating current) traction motor propulsion instead of DC (direct current) motors that are used to power the existing fleet. Converting to a more modern AC system will reduce the growing cost of maintaining an outdated system.

As part of its ongoing effort to maintain and upgrade the quality of its bus fleet, the CTA will overhaul its New Flyer buses (5800 Series) and Flxible buses. The overhaul will extend the service life of the buses, improve reliability and reduce emission levels.

Investment in the system continues as CTA expects to purchase 2,500 new fareboxes in 2004 for installation throughout the entire bus fleet. Fareboxes currently in place on buses are approximately 25 years old, well beyond their useful life. It is estimated that nearly $5 million is lost each year due to broken fareboxes. The entire bus fleet will be outfitted with new fareboxes over the next two years.

In 2004, CTA will begin work on the $50.5 million renovation of the Howard 'L' Station on the Red Line. The project includes building a new ADA accessible station entrance and fare control area that will provide a convenient, accessible path between the existing platforms and the recently-constructed multi-story parking garage and bus terminal on the west side of the station.

Funding has also been identified for the design and construction to rebuild the Main Street viaduct in Evanston. Construction is expected to begin in mid 2004.

Seven escalators on the Red Line and three on the Blue Line will be replaced over the next two years. From a business perspective, investing in new equipment saves on repair and maintenance costs, but this also is an investment with direct benefits for customers. Some customers find it difficult to use stairs, and escalators provide convenience and comfort as they travel the CTA system.

When 2004 begins, CTA will implement its Enterprise Resource Plan (ERP) system by replacing CTA's stand-alone computer systems with a software platform that centralizes and integrates the current financial and administrative information to better manage, track and allocate resources. A similar upgrade is planned for the maintenance information system that will help to more accurately track labor and material resources in bus and rail maintenance facilities. Improved processes and tracking of expenses and materials are key tools that contribute to effective budget management.

In early 2004, CTA will introduce the Chicago Card Plus, an enhanced version of the Chicago Card, the CTA's 2002 addition to its assortment of fare media. The Chicago Card Plus will allow customers to automatically add more value to their cards via credit or debit cards when the balance runs low. The Chicago Card Plus will also be used in the Transit Benefit program, increasing the ease with which businesses can participate in this cost-saving program.

CTA will move into its new headquarters at 567 West Lake Street in November 2004. This relocation will reduce the CTA's annual operating expenses by saving an average of $7.7 million annually over the life of a lease alternative. Consolidating administrative offices and owning rather than leasing will provide the strongest long-term investment value and allow the CTA to use capital funds rather than operating funds for its office space.

The CTA needs $5 billion over the next five years to bring its existing system into a state of good repair. Currently, the CTA has identified approximately $2.95 billion toward that goal and must secure an additional $2.05 billion to meet its needs. Despite the vital support the CTA has received in acquiring state and federal capital funds, the agency is still faced with a sizeable list of unmet capital needs.

State and federal support have been crucial to CTA's ability to rebuild the system. Specifically, City of Chicago Mayor Richard M. Daley, Governor Rod Blagojevich, U.S. House Speaker Dennis Hastert, the Illinois Congressional delegation, the Illinois General Assembly and Illinois FIRST have provided the support needed to bring the system closer to a good state of repair.

Kruesi said that CTA customers and the general public will have the opportunity to comment on the budget at a public hearing on Thursday, October 30, 2003, at 6 p.m. in the Adams Room, 6th Floor, of the Palmer House Hilton, 17 E. Monroe, Chicago.

"This recommendation is the result of months of analysis and number crunching by the CTA staff, " said Kruesi. ?But it is only one step in the process. Over the next few weeks the Chicago Transit Board will be reviewing and analyzing my recommendations. This is also a period for public review. The proposal will be available to elected officials, civic organizations and the general public for their review and feedback. Our objective is to end up with a final product that has considered a multitude of scenarios and viewpoints."

As part of the public review, the board will convene a special meeting later this month to discuss the budget.

Written comments can be submitted to the Chicago Transit Board until Tuesday, November 4, 2003. The correspondence should be addressed to Gregory Longhini, Assistant Secretary of the Board, Chicago Transit Authority, P.O. Box 3555, Chicago, IL 60654-0555.

The proposed budget is available for public review at the CTA's General Office at the Merchandise Mart, 300 N. Wells St., 7th floor, weekdays between 8 a.m. and 4:30 p.m. Regular and large print copies are available at this location. Audio copies are also available by request.

Copies will also be available at the main office of the Regional Transportation Authority located at 175 W. Jackson, 15th floor, Chicago. A copy of the proposed budget is also posted on the CTA's web site at www.transitchicago.com. A list of libraries and additional locations where the document will be available is attached.

# # #

Copies of the budget proposal will also be available at the reference desks of the following libraries:

Chicago Public Library

3 Regional Locations

Harold Washington Public Library

400 S. State Street, 10th Floor

Chicago, IL 60605

Sulzer Regional Library

4455 N. Lincoln Ave.

Chicago, IL 60625

Woodson Regional Library

9525 S. Halsted

Chicago, IL 60628

Chicago Public Library - Branches

Archer Heights Branch Library

5055 S. Archer

Austin Branch Library

5615 W. Race Ave.

Jefferson Park Branch Library

5363 W. Lawrence Ave.

Marshall Square Branch Library

2724 W. Cermak Rd.

Midwest Branch Library

2335 W. Chicago Ave.

South Shore Branch Library

2505 E. 73rd St.

Suburban Libraries

Evanston Public Library

1703 Orrington Ave.

Evanston, IL 60201

Evergreen Park Public Library

9400 S. Troy

Evergreen Park, IL 60805

Oak Park Public Library

834 Lake St.

Oak Park, IL 60301

Riverdale Public Library

208 W. 144th St.

Riverdale, IL 60827

Skokie Public Library

5215 W. Oakton

Skokie, IL 60077

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