(The Center Square) – The Regional Transportation Authority wants the Illinois legislature to eliminate a law that requires it to collect 50% of the authority's total operating costs from passenger fares.
Even if lawmakers eliminated the requirement, transit users would likely still have to pay to ride.
"Discontinuing the recovery ratio requirement would make our funding structure less reliant on rider fares, but fare revenue would continue to be an important component of the overall revenue needed to maintain balanced budgets," according to the RTA. "New funding sources must also be developed to maintain that balance."
The RTA said eliminating the requirement would give the boards that oversee the Chicago Transit Authority, Metra and Pace Suburban Bus more flexibility.
"With more resources and a funding structure less reliant on fares, the Service Boards could focus on enhancing service and providing transit coverage across the region, which broadens access to areas that have been historically underserved," according to the RTA. "This would also allow the region to innovate with different fare levels and models, such as seamless transfers or free or reduced rides for residents experiencing low incomes."
State law requires passenger fares, along with a few other sources of revenue such as advertising, to make up 50% of the total operating costs of the RTA systems: The Chicago Transit Authority, Metra and Pace Suburban Bus. The statutory 50% requirement applies to the combined regional recovery ratio, not the individual agencies. State lawmakers put the requirement in place in the 1980s to ensure passengers picked up half of the cost of running the systems.
In December 2021, state lawmakers waived the 50% requirement for fiscal years 2021, 2022 and 2023 due to the COVID-19 pandemic. The requirement is set to return in fiscal year 2024.
Doug Anderson, manager of budget and analysis for the Regional Transportation Authority, said RTA won't be able to meet the 50% fare recovery requirement in 2024 and 2025. Instead, it will use "non-specific regional level-revenue credits" to make up the difference. The credits "quantify the amount of revenue shortfall that is currently expected" and are "routinely utilized to identify developing problem areas in future budget years," Anderson said.
"In effect, we are self-disclosing that we cannot meet the 50% requirement in those years even with federal relief funding included as revenue," he said at the authority's most recent board meeting. "This confirms the need for an extension of the current temporary recovery ratio relief – or better yet – permanent relief or elimination of the recovery ratio requirement altogether."
Excluding federal revenue, the RTA's fare recovery ratio for 2023 is expected to be 23.6%, according to Anderson's presentation to the Board of Directors.
P.S. Sriraj, director of the Urban Transportation Center at the University of Illinois Chicago, said the 50% revenue recovery requirement doesn't work given the decline in transit ridership.
"Clearly, the transit boards and the RTA are well justified, in my opinion, to request lowering of the farebox recovery threshold from 50% ... because nobody knows where the ridership is going to be at in a couple of years' time," Sriraj said.
Shifting away from fare revenue could put more of the operating cost for the three transit systems on taxpayers, including those who don't use public transportation.
The RTA's strategic plan calls for changing the recovery requirement to make transit more equitable.
"The RTA believes that a permanent change to the current statutory recovery ratio requirements is warranted and will enable more equitable delivery of transit service across the region," according to the plan. "The RTA and Service Boards would still be required to maintain a balanced budget but updating the recovery ratio requirement would codify what the pandemic has dramatically illustrated and has been echoed by residents we’ve engaged with across the region – transit is an essential public service that should be provided not to generate revenue, but as a way to advance our region’s economic viability and future success."
While some riders have returned, the RTA doesn't expect ridership to return to pre-pandemic levels. Systemwide ridership was down 58% since March 2020, according to RTA data from the end of November.
The RTA has been using $3.5 billion in federal COVID-19 relief funding to balance its budgets. Anderson said officials must find new revenue sources before the federal funding runs out in 2026, which likely means tax increases.
The RTA five-year strategic plan calls for consideration of 11 tax and fee hikes at a time when fewer people are using public transportation. Fewer passengers mean less fare revenue.
The RTA's five-year strategic plan funding proposals include a mix of ideas, some of which state lawmakers have considered in the past. Most of the proposals would require support from state and local elected officials.
The proposal that would bring in the most money each year is a sales tax hike. It calls for a 0.25 percentage points increase to the existing RTA sales tax levied on Cook County and Collar Counties in the RTA service area. That would bring in an estimated $300 million to $400 million per year.
Another option outlined in the plan is a $0.05 per gallon increase in the state's motor fuel tax with revenues dedicated to transit operations. Illinois already has one of the highest motor fuel taxes in the nation behind California and Pennsylvania, according to a report from the American Petroleum Institute.
Also on the table:
- A congestion pricing mechanism to levy a geographic and/or time-based toll or fee on travel on Chicago area highways into the city
- Expanding the existing RTA sales tax to include services
- Implementing a vehicle miles traveled tax
- Expanding the Real Estate Transfer Tax from real estate transactions in Chicago to the entire RTA service area
- A 5% increase in tolls on the Illinois Tollway
- Increasing the vehicle registration fee for vehicles registered in the RTA service area by 10%
- Increasing the reduced fare reimbursement provided to transit agencies
- Eliminating the 1.5% surcharge on RTA sales tax receipts retained by the Illinois Department of Revenue
Many of those options would "need a significant support from the legislature," Sriraj said.
"It's not going to be easy," he said.
The RTA's strategic plan is "desperation," said Ted Dabrowski, president of Wirepoints.org, an independent nonprofit research organization based in Illinois. CTA, Metra and Pace are serving fewer people and the region's taxes are already too high, he said.
"They have a system that is half empty, but they won't talk about efficiency or cost-cutting," Dabrowski said. "They are ignoring reality."
Nationally, transit agencies do not set passenger fares based on the cost of each trip.
"In 2021, for each dollar spent on operating costs per trip across all modes and all transit systems, 12.8 cents are recovered through fares," according to the National Transit Database's 2021 National Transit Summaries & Trends report. "This is a 30% decrease from the 2020 fare recovery ratio of 18.4 cents per dollar spent on operating expenses, resulting from the COVID-19 public health emergency."