Making the case for capital funding
Metra has an economic model built on macroeconomic factors that existed over 40 years ago and are no longer sustainable in today’s economic climate. Absent adequate long-term sustained funding – both operating and capital – Metra cannot survive in its present form. Thus, the overarching strategic question for Metra’s future is: Do the people of northeast Illinois value Metra and do they want Metra to survive and grow?
Today, we are laying the groundwork for the 2020s. Over the next several months, Metra is taking a very hard look at its funding sources. We will be asking our stakeholders, passengers, non-riders, mayors and managers, county officials, planning agencies, economic development groups and business leadership groups to assist us in educating our state legislators about the critical need for more funding.
Last year, we used this space to outline the factors behind the financial crisis faced by Metra and the region’s other transit agencies. Another year has passed without substantial improvement. The difference this year is that Metra does not plan to raise fares in 2019. Through diligent cost controls, Metra is able to present a balanced operating budget for 2019 without a fare increase, and the Metra Board of Directors has decided to not raise fares for our capital needs. While our riders will appreciate this, let’s be very clear that the problems we outlined last year are only getting worse.
If Metra is in such financial straits, why not raise fares again? Because members of the Board recognize that Metra cannot possibly dig its way out of this financial morass through the fare box. The fare increases in the previous four years were intended, in part, to help provide a portion of the capital funding required to replace aging locomotives and railcars. But these increases raised only nickels and dimes relative to our billions of dollars in capital needs.
Metra’s passengers have already stepped up to the plate. But we still need their help. Now is the time for our passengers to help us educate state legislators about the dire need for operating and capital funding for public transit. It is our customers who are suffering and will continue to suffer from service disruptions caused by aging equipment and infrastructure.
So let’s start with what Metra’s loyal and frequent riders want:
- On-time departure and a safe on-time arrival
- The fastest possible trip time
- Reasonable fares
What has Metra delivered? Among its peers Metra has:
- The best on-time performance
- The lowest fares
- The lowest operating costs
Metra has accomplished this while operating the oldest fleet of locomotives and passenger cars in the United States. In addition, Metra operates in the nation’s most complex railroad environment with 1,300 to 1,400 trains moving through the Chicago region each weekday. Metra alone is responsible for 737 train movements, and it hosts 39 South Shore Line trains from Indiana, 18 Amtrak trains and up to 60 freight trains.
Metra fares cover just a third of what we currently spend to operate and invest in the system. But they only cover about a fifth of what we should be spending, because we continue to underinvest in the system.
On the operating side, we need to rethink our reliance on the current sales tax, the principal source of subsidy funding for train service operations. Those taxes are growing too slowly, hurt by fluctuations in our economy and the shift from manufacturing to service industries. In addition, the state has added surcharges for collecting our taxes and cut a portion of the sale tax proceeds that they contribute to the RTA.
The capital situation is even more serious. The state of Illinois has not had a bond program to fund capital projects since 2009, meaning that Metra currently has no state source of capital funding. Metra’s 2019 capital budget is less than $200 million, mostly from the federal government. This is well below the amount we need each year to bring our system into a state of good repair and keep it that way. Because we don’t have the money needed to replace our assets on a regular basis, it gets more expensive every year to maintain them.
The state of Illinois needs a large capital bill so that Metra can begin to replace its deteriorating infrastructure. However, it’s also become clear the past practice of “feast or famine” capital programs does not work – it is increasing the backlog of infrastructure needs faced by Metra, the region’s other public transportation providers and Illinois’ road and highway systems. That is why we believe a dedicated source of capital funding for the state of Illinois’ infrastructure must be identified.
Our passengers ask, what do I see in exchange for paying more money to ride Metra? Metra has been making significant investments in its fleet of locomotives and passenger cars to improve service reliability.
During the life of our car rehab program, Metra has, with its own employees, rehabilitated 250 railcars, saving Illinois taxpayers more than $100 million compared to outsourcing the work. That work sustains 60 well-paying, permanent jobs for our local economy. To date, this program represents an investment of more than $175 million in the passenger car fleet.
Metra is in the process of investing $30 million to upgrade and expand its capacity at its 49th Street facility to increase the manufacturing capacity from 35 to 60 cars per year. This is creating short-term construction jobs, and in the long-term additional permanent jobs.
More tangible evidence is the 21 recently overhauled locomotives that Metra acquired at a bargain price of $27 million that are now being delivered. Metra is in the process of overhauling 27 locomotives in-house, which is projected to save Illinois taxpayers $20 million as opposed to outsourcing this work. In so doing, Metra has created 30 well-paying permanent middle-class jobs, people who also reinvest their paychecks in our local economy. In addition, Metra is outsourcing the remanufacturing of 42 locomotives. Metra’s investment in overhauling its current fleet of locomotives is $115 million in addition to the $27 million for the acquisition of the 21 locomotives.
We believe Metra has demonstrated it will spend its funding wisely and effectively. We believe we can make the case that more funding is necessary. We are asking our passengers and all of our other stakeholders to join with us in telling and selling Metra’s story to members of the state legislature. That story is very simple:
Metra needs a sustained capital program and sustained operating funding indexed to inflation to maintain its existing service levels into the 2020s. Otherwise, drastic changes in service levels or other programs may be needed to shrink Metra to a size that its resources can sustain.
The full budget document can be viewed here.
Norman Carlson - Chairman of the Board
James M. Derwinski - CEO/Executive Director