Deal cut to avoid CTA fare hike

November 11, 2009 (CHICAGO) The deal was hammered out between Ill. Governor Pat Quinn and transit officials.

The governor announced that the CTA will get $166 million over the next two years. Pace, the regional provider of bus services, will get $8.5 million from the Illinois Department of Transportation, and $9 million from a special RTA fund.

Under the deal, the Regional Transit Authority would issue bonds with most of the money going to the CTA for capital projects. That would allow the CTA to use some of its capital projects money for normal operations.

Some are comparing the move to the person who pays off a credit card with another credit card. And, while the deal would avoid a fare increase through 2011, there would still be $90 million in service cuts.

All the region's transit agencies and the state government involved in the negotiations have run deficits at some point during the past year.

"I think it's very important at this time with our economy having tough times for many, many people that we try and hold the line with respect to fares," said Quinn.

Surrounded by most of the region's transit big shots, the governor announced the plan to avoid sharp fare increases at the Chicago Transit Authority and Pace paratransit services during 2010 and 2011.

"If you're going to cut service, this is the way we proposed rather than raise fares," said Terry Peterson, CTA chairman.

In the agreement, the Regional Transportation Authority will sell $166 million in bonds for capital projects on which the state will agree to pay the interest. The RTA would transfer the money to the CTA's operating budget over two years to eliminate the CTA's need for a fare increase. The state would grant a separate $17 million to Pace paratransit to balance that agency's budget.

Such a big funding commitment in tough economic times was made possible by the governor putting the state on the hook for the more than $15 million in interest to be paid on new RTA capital bonds for two years. The RTA doesn't have the money to back the bonds itself. It's a short term fix that kicks the issue of transit funding past upcoming elections.

Quinn--whose state government already has an estimated $10 billion deficit and is three months behind in paying its bills--was asked how much interest the state would have to pay in two years.

"For the debt service, it would be about $5 million or so in the first year, roughly $10 million in the second year," said Quinn.

CTA officials said with the money generated by the proposed bond sale the agency is still $100 million in the red and without union concessions will have to curtail services and lay off 1,100 workers.

Last month, Quinn said the state needed a $900 million loan just to meet its payroll and bills for the final weeks of 2009. He responded to a Pew Center study released on Wednesday that listed Illinois among nine states headed for a fiscal calamity.

"I said that on January 29th when I took office. This is the worst fiscal calamity facing Illinois in the history of our state," said Quinn.

On CTA layoffs and service reductions, officials said they are scheduled to go into effect on February 1, 2010. Still, President Richard Rodriguez and CTA Chairman Terry Peterson could offer many specific on when and where the service cuts would be imposed.

At a Pace board meeting on Wednesday night the governor's moves were applauded by the politicians. But the political expediency wasn't lost on some of Paces' neediest clients.

"Every since Pace took over…the budget has increased.," said Vickie Hale, mother of Pace paratransit rider.

Others who use public transit see things a little more simply.

"I think CTA appears to be lower than they are. We've been robbed already. They could charge seniors 50 cents a ride and we could all keep things the way they are," said Andrea Frederiksen, CTA rider.

According to the Pew Trust, Illinois is one of 10 states that are in serious financial distress. The only ones worse are California, Rhode Island and New Jersey.

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