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First Published - 04/05/2021 - 5:27PM

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Last Updated - 04/05/2021 - 5:30PM

Why are fares going up?

The Metra Board has approved a $787.2 million operating budget that raises fares and reduces some service in order to close a $45 million budget gap. The Board also approved a $196.8 million capital budget – only one-sixth of our need.

We’ve received a lot of questions about why we are raising fares again next year and what we’re going to do with the money, so we thought we’d provide some more details about our budget and funding situation. (See new fare table here. The fare increase starts Feb. 1, including February Monthly Passes on sale in late January.)

First, to be upfront and blunt, we are raising fares because everything we did this year will cost more to do next year. And we’re raising fares because the public subsidies that would normally help us cover those rising costs have been cut.

And again, to be upfront and blunt, we are not raising fares so we can do anything new or extra next year. The additional money won’t be used to buy or rehab any more cars or engines, or rehab any additional stations, or add Wi-Fi or any other new amenities. In fact, even with the new revenue, we’ll have even less money to do those sorts of things next year.

How can that be? To understand, you need to know two basic points: first, we have two budgets each year – operating and capital – which are used for different things and are funded in different ways. Second, fares don’t cover all of our costs; they don’t even cover most of our costs.

The operating budget pays for the day-to-day costs of running the railroad – things like labor, fuel, basic maintenance and administration. The capital budget pays for the renewal and replacement of our infrastructure and rolling stock (railcars and locomotives).

When Metra was created by the state out of the financial problems of the private commuter railroads in the 1970s and early 1980s, the state mandated that the regional system (Metra, CTA and Pace) pay for at least half of its operating costs with fares. It was understood that public subsidies from local, state and federal sources would cover the rest of the operating costs (which is done through a regional sales tax and partial state match) and the capital costs (done through grants from those sources).

Fares, therefore, pay for half of our operating costs and virtually none of our capital needs (more on that later). This year, we will collect $357.5 million in fare revenue. Our combined operating and capital budgets total about $1.1 billion, so fares cover 32.4 percent of our overall costs.

Next year, we expect to collect $374.7 million in fare revenue, $17.2 million more than this year (see fare table on Page 2).  But our combined operating and capital budgets total $994.1 million – about 10 percent less than this year. That’s because public subsidies – which, again, pay for the majority of our costs – are going down. Because subsidies went down, fares are paying a higher percentage of our overall costs – 37.7 percent.

What subsidies declined? On the operating side, the state imposed a fee on its collection of the regional transportation sales tax and cut its partial match. That cost us $13 million in operating subsidies this year and another $13 million next year (and it could be more if the state maintains those cuts in its 2019 fiscal year, which begins in the middle of our 2018 fiscal year). Lagging regional sales tax collections, probably due to the growth of the service economy (services aren’t taxed) and web shopping (local taxes such as ours are not always collected online) cost another $2 million. Meanwhile, our annual costs increased $30 million. (We are covering the resulting $45 million gap with a fare increase and cuts in expenses, including $3 million in trims to the Rock Island, North Central Service, SouthWest Service and Milwaukee District North lines. Details are here.)

On the capital side, Metra has not received adequate capital funding from its traditional sources for years. The RTA now estimates we need $1.2 billion a year for 10 years to achieve and maintain a state of good repair on our system, but in a good year we have a quarter of that amount, and next year we’ll have one sixth. The state has not approved a big infrastructure program since 2009 and reduced by $265 million the amount we expected to receive from that 2009 program. There is no new state capital funding on the horizon, and there is no RTA money coming next year, either.

Two other factors are worth noting. First, Congress mandated that Metra install Positive Train Control (PTC), a complex and expensive GPS-based safety system. While Metra recently received a $21 million federal PTC grant, we have to cover the rest with our already inadequate capital funding sources. We’ve spent $150 million so far (more than the last three fare increases combined) and we expect to pay $400 million by the time we are through. (Once it is running, it will cost us an estimated $15 million to $20 million a year to operate and maintain.)

Second, we had to spend the bulk of the state funding from that 2009 bill on one thing:  buying new cars for the Metra Electric Line, at a cost of $585 million. The demands of PTC, the Metra Electric car purchase and the $265 million reduction in state aid have severely limited the availability of capital funding for other purposes.

Because capital funding has been so restricted, in recent years Metra has raised fares not to cover operating costs but to help, in a small way, pay for capital needs. In fact, only part of the 2015 increase went to operations and the 2016 and 2017 increases went to PTC and capital needs.

But those increases didn’t solve our funding woes. When you want to buy 367 new cars (at a cost of more than $1 billion) or 52 locomotives (at a cost of more than $300 million), fare increases of $6.2 million, $16.2 million and $17.2 million don’t go very far. Those increases, however, did help us with our PTC costs and with the renovation of 115 cars and 25 locomotives.

For more details on Metra’s 2018 budget and funding issues, please click here.

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