Feb. 30, 1992. Illinois Bell today announced that telephone service will no longer be provided to residential customers in a ten-square-block area of Uptown near Wilson and Broadway, effective April 1. “The people there are not making enough phone calls to justify maintaining those wires,” one executive complained. “It’s no longer cost-effective. We’re only getting 25 cents back on every dollar we spend on telephone service there.”

Not very believable, is it? But in principle it’s what the Chicago Transit Authority does every time it lops off another bus route or another el stop.

To understand what the next round of CTA service cuts this summer means, we have to grasp one basic idea: a dense, vital city–as opposed to a suburb populated mainly by parking lots–requires dependable mass transit serving all parts of town at all times of day. The system may be slow. It may be grimy. It is usually crowded. But without the CTA, Chicago as we know it would cease to exist.

The CTA’s web has already been stretched so thin that from now on, every little cut hurts tremendously. As Jacqueline Leavy, executive director of the Neighborhood Capital Budget Group (NCBG), says, “You can’t pull one vein out of the body without hurting the body.” If the CTA continues in the same budget-cutting mode customary in recent years, Chicago will soon find itself without a circulatory system.

In the past Chicagoans have given a lusty scream whenever another vein was pulled out, then gone back to business almost as usual. But since last fall’s simultaneous fare increase and service cuts, several groups–most visibly two coalitions, NCBG and the fledgling Citizens’ Transit Organization–have started organizing to address the whole transit problem, not just to protest, Alinsky-style, against one dropped bus route in one neighborhood. “It’s a question of the integrity of the system,” says Leavy, who has been pleased to find grass-roots agreement. “The CTA is our shared public capital stock. It belonged to our parents and grandparents, and our children will inherit whatever’s left. We can’t afford to lose public transportation and then, 20 years later, try to build it back.”

CTO hopes to make public transportation a major public issue–something it hasn’t been since the municipal-ownership movement 90 years ago. That effort is curiously appropriate, considering that many of the mistakes, confusions, and halfway solutions of the streetcar era still haunt us today.

A visitor from Mars might conclude that the CTA has decided to commit suicide slowly. Visitors from only slightly less remote places, like downstate cities and towns, will also recognize the slow but sure process. Former-alderman-turned-congressional-candidate Dick Simpson calls it “the death spiral.” Because of low ridership the agency cuts service; because of reduced service it loses riders; because of lost riders it raises fares; because of higher fares it loses riders. Eventually the routes become so few and the waiting time between vehicles becomes so great that anyone with any choice travels some other way, and the transit system either becomes infinitesimal or dies (this has already happened in most small cities). At that point–no matter what the sign on the edge of town may say–that city ceases to be a real city and becomes a place where you cannot live without a car.

Like most people of leftish persuasion, Simpson believes that the CTA’s problem is mainly money. “Illinois’ congressional delegation has failed us miserably,” the would-be congressman told a workshop at a December transit conference sponsored by the Center for Neighborhood Technology and Roosevelt University’s Institute for Metropolitan Affairs. The only way to save the CTA, Simpson added, is to almost double the financial aid it gets from the feds.

If Simpson is correct, all we have to do to save Chicago’s mass transit is to persuade those stingy Republicans and Rostenkowskis in Congress (and the statehouse) to give the CTA more money–though it already eats up over one-third billion tax dollars every year. Unfortunately the historical evidence suggests that, in the unlikely event that more money was provided, CTA service would probably get worse.

At the conference, as soon as Simpson sat down economist Arthur Lyons of the Center for Economic Policy Analysis rose to tell the group, “It’s not clear to us that the problem is lack of money.” Lyons and colleague Spencer Staton had released a brief report in November comparing CTA operating expenditures (in constant dollars) with CTA service (in revenue-miles). The report’s cover shows a graph, which runs from 1955 to the present, that tells all: starting in 1970, the year the CTA began getting substantial government subsidies, the “operating expenses” line curves up and the “service” line goes down, never to meet again. “Paying more and getting less” is not just a CTA protesters’ slogan but a statistical fact. In 1955 $1,000 (1992 dollars) bought 301 revenue-miles; in 1991 it bought 170. Even more amazing, “The years with the greatest increase in operating expenses were also the years with the biggest service cuts,” the report states. That correlation still holds true: the CTA cut routes last fall even though its 1992 budget is $13 to $19 million greater than its 1991 budget.

“Maybe the main purpose of the CTA is not, as we would think, to have riders,” Lyons said. “Think of the CTA as a large corporation with two divisions. Division A runs the buses and the els. Division B lobbies for and receives subsidies. Division A is a cost center; Division B, with fewer expenses, is a revenue center.” Is it any surprise that the management of such a corporation would tend to focus on Division B, which generates rewards instead of headaches? “In our view,” Lyons said, “we’ll get nowhere if we act as lobbyists for people who have proved that they won’t spend extra money on service.”

CTA officials find weaknesses, however, in the CEPA study. One reason that service costs more is that it’s been improved–notably in the substitution of rail miles for bus miles, as in the subway extension to O’Hare. Other service costs, such as making buses accessible to the disabled, have risen since 1955. Moreover, the gap between the two lines on the graph did stop growing in the 1980s, and the fact is the CTA’s record is no worse, and sometimes it’s better, than that of other large-city transit systems. Partly because the study was released during the raucous public hearings last November, CTA officials suspect it was intended more as propaganda than as objective report. But Lyons’s main point is secure: money spent on public transportation buys less transportation now than it used to.

Whether or not the CTA needs more money, Simpson and Lyons (and NCBG and CTO) agree that it needs to be held more accountable to its customers. As IIT historian Paul Barrett puts it, “I think the CTA is corrupt for the same reason the private monopolies were corrupt–you can’t get their attention.” In a recent paper he authored with Gary Snyderman, Simpson shows how the CTA and RTA budget hearings are timed to preclude meaningful public participation. Then there’s the near-total lack of coordination between City Hall and the CTA: “In Chicago,” the NCBG complains in a position paper, “planning for and managing our transportation infrastructure is like watching a flock of shepherds guarding one lame sheep”–and worst of all, the city shepherds are spending almost all their time and money on another and highly dubious lamb, the downtown circulator.

Just having one or two rider advocacy groups to play Ralph Nader to the CTA’s General Motors would be a big improvement, as even agency insiders acknowledge. Representative Lee Preston has in addition proposed an elected Citizens Transportation Board comparable to the successful Citizens Utility Board; if state lawmakers pass his bill, the CTB would have full access to internal CTA documents in order to help citizen groups do their watchdogging.

The findings in Staton and Lyons’s report don’t surprise Anthony Pagano: “Intuitively you can see there should be a negative relationship between efficiency and subsidy, because you’re eliminating an incentive to be efficient.” Pagano, UIC business professor and executive director of the Metropolitan Transit Association (an advocacy group of private transportation providers), cites CTA figures showing its uncanny, and unflattering, resemblance to the public schools: the agency provided only 561 million trips in 1991, down from 642 million in 1985–but did so with more employees (13,400, up from 12,200 in 1985) and covered more miles to do so (130 million, up from 124 million).

Inefficiency in public agencies is hardly news. What’s new is to find a few progressives acknowledging that government subsidies are often counterproductive, and to find others considering this as a possible cornerstone of their strategy.

The French philosopher Blaise Pascal became the first transit magnate when he inaugurated horse-drawn-wagon service in Paris in 1662. He also became the first transit magnate to go bust: when he decided to charge for his service, ridership dropped off sharply, and he quit the business. Later transit enterprises have enjoyed higher levels of technology but comparable financial success.

The Chicago City Council first passed an ordinance for a “horse railway” in 1856; according to Alan R. Lind’s Chicago Surface Lines, “Nothing was ever done under this ordinance.” The city did get its first horsecars soon afterward, and then its first cable cars (1882, on the south side) and its first electrically powered streetcars (1890, on the far south side), all privately owned. Each new system moved more people faster and cheaper than the one before, but each also required more investment; and so the small neighborhood lines were absorbed by ever-larger conglomerates. In 1897 transit baron and el builder Charles Tyson Yerkes (who once said, “The short hauls and the people who hang on the straps are the ones we make our money out of”) tried to get a 50-year franchise for his many rail and street-car lines. When reformers induced the City Council to deny him the franchise, he sold out and went back to London.

At the beginning of this century the companies running the els and streetcar lines were few, politically powerful, essential to the functioning of a yet-carless city, largely unregulated, and more hated even than Commonwealth Edison has been in living memory. From a commuter’s point of view, perhaps their worst offense was the stupendous crowding on rush-hour cars. In IIT historian Barrett’s masterful book The Automobile and Urban Transit: The Formation of Public Policy in Chicago, 1900-1930, he records how the death of a young woman commuter in 1906–she fell from an el platform at Grand and Paulina while trying to board an already jammed train–led aldermen to vie with each other in oratorical condemnation. In a less tragic vein, about that time an Uptown man stood in the path of a streetcar and refused to move for 15 minutes. “Your franchise has expired,” he yelled at the exasperated motorman. “Mine hasn’t.”

Politicians like Chicago mayor Edward F. Dunne (later governor) believed that the best way ro reduce rush-hour crowding and to bring about such reforms as a citywide transfer policy was for the city to buy up all the systems and run them for the benefit of the people. For a variety of reasons he was never able to bring this about in his lifetime–he died in 1937–and until the end of World War II Chicago had a hybrid system: privately owned transit companies franchised by the city and regulated for the most part by the state. (That’s how Chicago gets its electricity, too. The difference is that no one has yet invented a cheap, flexible, personal electricity generator that would enable customers to disconnect from the Edison grid.) This compromise transit system managed to combine the worst aspects of both private enterprise (lack of civic accountability) and public ownership (political factionalism and lack of economic accountability).

It’s by no means obvious that we would be better off if Dunne had succeeded, however. The city imposed unrealistic regulations on the private companies; had the city owned the transit system, it might just have gone broke even before the Depression. Among other things, the city required the private companies to hold the citywide fare down to five cents (a rate first set in 1863 and maintained well into the 1900s), ultimately forcing them to operate at a loss. For years the city required streetcars to stop–whether or not any potential passengers were visible–on both sides of every intersection and in the middle of long blocks. Barrett, no friend of privatization, acknowledges in The Automobile and Urban Transit that mass transit could not possibly “make profits, build suburbs, reshape the city, and, simultaneously, charge no more than a 5 cent fare. . . . the public would not pay, either in fares or in taxes, for the services it demanded.”

The coming of low-priced automobiles meant that soon the hated transit barons no longer enjoyed a monopoly. During the teens and 20s, as Barrett tells the story, automobiles proved to be powerful competition for the streetcars and els. For one thing, the city found it easier to provide for cars than for mass transit. To accommodate the automobile meant paving the streets–a task that could be done piecemeal, and one that everyone agreed was city government’s job. Nobody asked whether a paved-over Cottage Grove would pay for itself.

But to improve and extend mass transit meant that long-festering political sores had to be reopened–not just the war over municipal ownership but the endless battle between the Loop and the neighborhoods. Take street crowding, for instance. The streetcar lines were supposed to pave and plow their tracks on the streets, which were often otherwise unpaved. Now the new automobiles began to usurp this ideal driving surface, causing endless delays to the streetcars, especially in the Loop. Since automobiles couldn’t be kept off the streets, one solution was to build subways for the streetcars. But advocates of neighborhood businesses objected that a Loop subway would unfairly subsidize downtown businesses. Politics made it easy to pave the streets for cars, and almost impossible to make comparable improvements for mass transit.

Underlying this dispute and others were deep-seated ideas that few people ever mentioned, much less debated: the streets were clearly a public utility, while the streetcars and els were somehow both private business and public utility. Today the CTA is still regularly impaled on one horn or the other of this dilemma; in the 1910s and 1920s the confusion ensured that automobiles got the infrastructure they needed while public transportation languished in political purgatory.

In the early 1920s, the automobile revolution made the “motor bus” possible but did not guarantee its acceptance. The city resisted the innovation–yet another problem with public control of a technologically evolving industry–and so buses first appeared only on the boulevards, which were not controlled by the city but by a competing bureaucracy, the Park District. (Disgruntled sardines on the number 36 will appreciate this historical irony: for years buses were considered very upscale–so much quieter and more comfortable than streetcars, in fact, that significantly higher fares were charged.)

Following the automobile came more hazards for mass transit: turn-of-the-century reformers finally achieved two of their goals: a metropolitan area without disastrously dense tenements, and a less overwhelming focus on downtown. Unfortunately, as the city became more spread out and as the suburbs grew from bedroom towns to competing employment centers, fewer people needed or wanted to use mass transit. Hampered by the five-cent-fare requirement, the transit companies lacked the financial reserves to cope with a stable or shrinking ridership. By the Depression they were all in bankruptcy. After World War II, they became part of the new Chicago Transit Authority and complete municipal ownership was finally achieved.

But the realization of a half-century-old dream of public ownership did not stem the ongoing decline of mass transit. The federal government subsidized suburban housing and built freeways, but el tracks down the medians came late if at all. When the CTA began to run in the red in 1970, Mayor Daley I got state government to start paying part of its costs; today that arrangement takes the form of the Regional Transportation Authority passing on federal and state subsidies to three “service boards”: commuter railroads (Metra), suburban buses (Pace), and the CTA.

CTA fares now cover just about half the cost of the transportation, and those who pay the other half are having their say. RTA chairman Gayle Franzen last September told the Sun-Times that the current cuts are a “first step toward considerable downsizing of the CTA” and that “a few years from now you won’t recognize the CTA as it is today.”

Because Franzen holds the purse strings, what he says is no empty threat. And because transit planning is city planning, his words threaten not just one obsolescent overpaid bureaucracy but the fabric of the city. “When you disassemble a transit system,” says Barrett, who should know, “you are planning something. If you’re not planning something, you’re an idiot.”

To prepare for this story I asked Joseph Schofer, director of research at the Transportation Center of Northwestern University, what books I should read. His deadpan reply: “How about the Book of Job?”

The history of the CTA and its predecessors does suggest that almost every imaginable economic arrangement has been tried–private ownership, regulated private ownership, public ownership without and then with subsidies–and failed. That is not, of course, the CTA’s official view. The CTA simply wants a larger slice of the subsidy pie distributed every year by the RTA, and Dan Leffers, CTA’s deputy executive director of finance, thinks they’ve earned it: “Nobody seems to appreciate that since 1985, CTA’s rate of expense growth has been less than inflation, and less than Metra or Pace.”

Most of RTA’s subsidy money comes from a regional sales tax, most of which by law must be distributed according to a formula fixed in 1983, after a horrendous fight between city and suburban politicians. Because the suburbs are growing faster than Chicago, this economically sensitive tax now funnels more dollars to the suburbs and their transit systems. “Is sales-tax growth a good measure of the need for public transportation?” Leffers asks rhetorically. “No. And as a result, CTA riders increasingly have to pay more and more, their suburban counterparts less.” The CTA says it carries 84 percent of all the riders in the RTA region–but gets only 62 percent of the subsidies.

CTA officials acknowledge that getting lawmakers to change the subsidy formula in their favor will be a political long shot this spring and hopeless in 1993, once the new legislative districts (Republican-drawn and increasingly suburban) take effect. And not only does the CTA lack clout, according to Metra chairman Jeffrey Ladd, its argument is no good.

“Robbing Peter to pay Paul makes Peter poorer and makes Paul the recipient of stolen goods,” Ladd told a hearing late last year, adding in an interview: “The formula [for counting riders and distributing subsidies] was originally devised in the most advantageous way for the CTA. When someone takes a bus to an el to another bus to get to work, they can count it as three trips; if we haul someone all the way from [northwest exurban] Harvard, that’s counted as only one trip.” By a correct count, says Ladd, the CTA “only carries 54 percent of the riders in the metropolitan area. About 60 percent of the subsidy funds come from the suburbs. The CTA spends in excess of 60 percent of them.

“I will never say the suburbs have no obligation to cross-subsidize the CTA. They do.” For one thing, about one in nine Metra riders also uses the CTA. “But there is a limit, and we’ve reached it. It’s time for them to manage and stop whining.”

Ladd’s rhetoric is friendliness itself compared to the anger RTA chairman Franzen has vented against the CTA bureaucracy (though not against CTA chairman Clark Burrus). In a WBBM AM interview conducted before the appointment of Robert Belcaster as CTA president, Franzen complained of nameless bureaucrats’ “pervasive attitude of untouchability. . . . It is amazing what begins to happen when you say, why can’t we lay off significant numbers of people in this department or that? And suddenly you’ll start hearing–‘Well, we’ll be sued.’ ‘Well, the union contracts won’t allow it.’ ‘Well, federal government guidelines in this particular area won’t let you do that.’ All of a sudden you run into a stone wall.”

Franzen does not imagine that even a fat-free CTA would have enough money to survive. “But before we can go to the voters and talk about a tax increase or whatever, they have to positively show what they’ve done inside the Merchandise Mart [where supervisory CTA headquarters are located].”

When pressed, Franzen says that he does not want to see the CTA slashed to a mere rush-hour commuter service. But more radical (and far less influential) libertarians would gladly run that risk. In the 1990 Heartland Institute publication Coming Out of the Ice, economist John Semmens describes public transit in Illinois as “a massive investment in a public service few people will ever use” and proposes that federal and state subsidies be phased out. Transportation consultants Wendell Cox and Jean Love (based in Belleville, Illinois) present a similar view on public transit generally in a Cato Institute paper published in October.

The libertarians unearth some good points from the mountains of transit research available–for instance, buses operating at less than capacity do not detectably decrease motor-vehicle pollution or congestion, and poor people nationwide make only 7 percent of their trips via mass transit. But their conclusions, while economically logical, don’t make sense given the structure of the city. In Chicago, at any rate, more than a “few” people use the CTA, and many who never use it benefit from uncongested expressways and increased property values in areas it serves. “The guy with a car,” says Barrett, “doesn’t realize that his car is no use without a CTA.”

Semmens speculates that “Chicago would still have buses and trains” without a CTA or RTA–that private business could afford to run them by raising some fares and restructuring others. But this is pure speculation. Public response to fare hikes in recent months that are far less drastic than what Semmens proposes and to the Metra fare hike of the early 1980s suggests that privatization would do nothing to halt the death spiral. And unless you’re prepared to jettison Chicago’s density, you have to have a mass-transit system of some kind. The market might dictate that every other building in Chicago be razed for extra parking and freeways in a post-CTA era, but the market is a human tool, not an Aztec god.

In the CEPA study, Spencer Staton and Arthur Lyons go along with the libertarians further than one might expect, arguing that subsidies currently give CTA managers incentives to cut service and to “manage by crisis” (that being the only way to get more money). But then they take a sharp left turn. Mass transit, they argue, is not a market commodity but a public utility like gas or electricity or water supply. They even put “efficiency” in quotation marks throughout their report: “The CTA is not a private, for-profit entity, and it never has been. Applying to it the standards of a private company can only lead to confusion”–or more precisely, destruction.

State law now requires the CTA to get more than half of its budget from passenger fares. The easiest way to achieve that “farebox recovery ratio” is to cut routes that fail to meet it–the first step in the death spiral. Staton and Lyons think this requirement should be dropped. “Even without legislative action,” they write, “the RTA could allocate its discretionary funds on the basis of new service added or new riders attracted. Members of the state legislature should replace the farebox recovery ratio with similar performance measures. Service indicators that should be avoided are those that embody private-sector notions of “efficiency,’ such as passengers per vehicle or per vehicle mile, since these only encourage further cuts in any route with below-average ridership.”

Under Lyons and Staton’s system, however, the problem would be the exact opposite of that produced by the libertarians’ solution–instead of being encouraged to decrease service, managers would have an incentive to deliver ever-larger amounts of it, whether this represented the best expenditure of limited public funds or not. Without some “private-sector notion” of efficiency, why not run a bus on every street, or a Number 29 every minute?

“In the short run I don’t see that as a problem,” replies Lyons, who acknowledges that they haven’t completely thought through the question. “I’d be happy to get frequent night service covering the whole grid.” Andrew Goldsmith of the Industrial Council of Northwest Chicago says, “CTA reform means a full-service CTA seven days a week that serves all communities. You don’t shut down highways at night, or electrical service.” In a similar vein, Reverend Leonard Deville of the Alpha Temple Missionary Baptist Church at 6701 S. Emerald agrees that the coalition he represents could tolerate fare increases more easily than service cuts.

Staton sums up the argument in the CEPA study: “We put ‘efficiency’ in quotes because we wanted to shift the debate to, ‘What is this transit service that we’re buying?’ People in this city used to expect to be able to get wherever they needed, 24 hours a day. In that context, then we can talk about how to do it for the lowest price. What we have now is not the system we want to buy.”

Michael Gillis in the Sun-Times quoted one of the consultants who recently roasted CTA management: “The more the CTA can think of itself as a business, the better off the CTA will be.” This has been conventional wisdom for years now, especially at the highest levels of state and federal government, but it dangerously confuses two different issues.

UIC business professor Pagano explains it best: “Economists distinguish between two kinds of efficiency: allocative efficiency, in which you allocate resources to their highest-value use; and managerial, or cost, efficiency, in which you determine how to produce services in the most economical way possible.” Within the CTA, allocative efficiency is deciding where and how often the els and buses ought to run. Managerial or cost efficiency is finding the cheapest way to serve those routes. (Naturally, the members of Pagano’s Metropolitan Transit Association believe that private transit providers are the answer to the CTA’s cost-efficiency problems; they don’t take a position on the first issue.)

These are two separate decisions. At the level of allocative efficiency, someone has to decide how much transit service Chicago needs to go on being Chicago and not Schaumburg. That’s a public-utility decision. You don’t drop a bus route simply because it doesn’t pay, any more than you drop a telephone exchange because it doesn’t pay.

That “someone” right now is the CTA board, half of whom are appointed by the mayor and half by the governor, operating under severe constraints set by the RTA and by the state legislature. And right now that decision is being made piecemeal and in a “businesslike” way–in other words, in the direction of the death spiral. (Belcaster’s short-lived proposal to replace the Lake Street el with express buses is a good example.) This should be a political decision, not an economic one, because it’s a question of whether and how Chicago will be a city. And since half the CTA’s operating funds are coming from out of town, it will probably be necessary to educate a lot of farmers and suburbanites on the value of cities.

Once the appropriate minimum level of service is decided, then it’s cost-efficiency time, and all those “businesslike” options come into play–higher taxes, changed subsidy formulas, private contracting, use of vans instead of buses on some late-night runs, mandatory contributions from developers and property owners who benefit from transit, the encouragement of innovation by private entrepreneurs, etc. Once this level has been reached, the consultants are right to say that the CTA should be as businesslike as possible. For one thing, it’s not likely that those farmers and suburbanites will be anxious to help out a demonstrably inefficient city. And once this level has been reached, as journalist and transit watcher Nina Sandlin told a 1990 Center for Neighborhood Technology conference, private transit can be part of the mass-transit picture:

“There may be ‘transit products’ that don’t exist yet. It doesn’t have to be a choice between the Reaganites’ drive to make everything ‘self-supporting’ and the transit establishment’s insistence that private incursions would ‘cream off’ the profitable routes. . . . Most innovation comes from small companies, and transit may be no different. . . . Often a big bureaucracy just has no mechanism to give a new, limited idea the loving attention it needs–the kind it might get from a neighborhood bus operator, who might only have two routes, say. That ‘failed’ route could be some small entrepreneur’s windfall.”

Private enterprise can’t cure every CTA ill; as Art Lyons observes, an agency that can’t manage itself is unlikely to excel at overseeing private contractors. Libertarians who promote private contracting have prudently avoided discussing details of the CTA’s biggest contracting-out program, the Dial-A-Ride service for disabled Chicagoans, who complain vigorously about poor service and limited availability (you have to make a reservation before 6 AM of the day before you want to travel). This doesn’t prove private contracting won’t work, but it does prove one of Lyons’s points: private contracting won’t work if the public agency doing the contracting is not itself well managed and accountable.

Unfortunately, Reaganauts and Edgarnauts and libertarians would just as soon forget about allocative efficiency and apply the business formula at the political level, too. (They aren’t consistent, thank heavens: when Franzen ran the toll-highway authority, he didn’t close the Tri-State between 1 and 4 AM.) And liberals, socialists, and other progressives tend to view the contracting out of any CTA service as a betrayal of its mission as a public utility. (They aren’t consistent either: not even the Revolutionary Communist Party has suggested that City Hall start its own copier factory rather than buying the machines from private vendors.)

The CTA challenge is not just to manage, as Metra chairman Jeffrey Ladd has said. It’s also to keep two perfectly good ideas in mind at the same time, and in their proper places. Saving public transportation is too important to leave to the ideologues. The alternative is to admit that Chicago is obsolete.

Art accompanying story in printed newspaper (not available in this archive): illustration/Kurt Mitchell.