An Open Letter to the Chicago Transit Authority

This open letter is a project of the 2012 Presidio Graduate School’s Capital Markets class.  To read more letters, visit the project page here.

An Open Letter to the Chicago Transit Authority,

I am a MBA student at Presidio Graduate School studying the Chicago Transit Authority, specifically ways in which the organization can viably maintain service without the continued threat of increases in fares and cuts in service. I am sure you are aware of the many social, economic, and environmental benefits a well-run public transportation system offers a community. Public transportation is necessary for a city to grow sustainably. It reduces congestion and emissions while increasing mobility and economic opportunities. Public transit creates jobs, gets people to their jobs, and generates business in areas located near transit lines. It allows people without other transportation options to be active members of their communities and encourages exercise. It makes living in a city as large and expensive as Chicago feasible for millions of residents, including myself. As a resident of Chicago who uses the CTA daily, maintaining its affordability and reliability is more than just an academic exercise.

The CTA is in need of improvements to reduce crowding, renovate dilapidated stations, make stations handicapped assessable, and eliminate slow zones. Funding these improvements through cutting service and increasing fares is unsustainable. It will discourage ridership, particularly for those who have no other transportation options due to financial reasons, and make commutes more difficult. Relying on these strategies to close financial gaps will drive the system towards inefficiency and disproportionately impact segments of the population that depend on the system the most.

In recent months both individual riders, as well as business owners located near bus lines that were proposed to be cut, lamented the most recent round of proposed service cuts. Both parties understand the value of having access to public transit. In order to successfully fund the improvements and operations of the CTA I suggest implementing a form of value capture. Value capture attempts to recover the benefits experienced by all entities as a result of the existence of an efficiently run and well maintained public transportation system. Riders currently pay for their benefit through the standard fare paid every time they step on a bus or train, but the opportunity to recover benefits from other benefiting entities remains.

There are several different forms of value capture that attempt to recover a portion of the benefits businesses and land owners experience every time a rider steps onto a bus or train. Some of these forms have been successfully implemented in other cities throughout the US and internationally, including Land Value Taxes, Tax Increment Finance, Special Assessment Districts, Transportation Utility Fees, Joint Development, Air Rights, and Development Impact Fees. In a 2010 report done for the Chicago Metropolitan Agency, S. B. Friedman & Company outline opportunities associated with implementing these forms of value capture. While the strategies in the report focus on value capture as a funding mechanism for new construction, they do have potential to offer ongoing funding for operations as well. I would encourage the CTA to explore these ideas, and work to find solutions that would allow them to be successfully executed, rather than returning to the same strategies that have been proven unsustainable.

Thank you for your time and consideration on this matter.

Sincerely,

Lindsey Kauffman