Diverging Approach: Flip It and Reverse It

Correction, 10/9/18: This month’s board meeting is today instead of Wednesday, for whatever reason. This post has been updated accordingly.

This Wednesday Tuesday is Metra’s next board meeting, and all eyes are going to be on the proposed 2019 budget. The budget will outline any proposed service cuts, a doomsday the board warned us about last month when they also pledged not to raise fares next year. I’m very interested in seeing what Wednesday Tuesday holds, but I’m going to use this post to talk about something else on the agenda that is, dare I say, a little progressive:

Metra wants to do a public-private partnership with a consortium of Lake County businesses to strengthen their reverse commute options on the Milwaukee North.

That’s… awesome. For any other transit agency this would be just an interesting development to keep an eye on, but for Metra this is a BFD. This pilot project – assuming the board approves it – hits the trifecta of things we’ve been pushing for: (1) more frequent trains that (2) reflect evolving commuting patterns in the region while (3) finding innovative financial solutions to make it happen.

To be clear, it’s not perfect. First and foremost, I’m sure the public-private partnership (P3) funding scheme for the pilot will get lots of press, and rightly so. But the future of transportation funding should not be focused strongly on P3 funding. Our public agencies operate at a loss in order to provide a service to its constituents; private companies operate to maximize profit to their shareholders. Sometimes there are projects that fit squarely in the middle part of that Venn diagram where both sides prosper (usually by the private side infusing needed capital for public-agency improvements and getting a portion of the generated revenue as a return on investment), but sometimes the two sides have differing objectives that often – not always, but frequently enough – leave the taxpayers holding the bag since most P3s limit the risk exposure from the private sector in order to make the project more financially feasible for investors. (See: parking meters, Chicago.)

There’s also the added wrinkle of transportation equity: a P3 pilot along the Milwaukee North corridor is possible because of the wealthy communities and businesses in the Lake-Cook Road corridor, but my fear would be a similar pilot that would serve a significant number of workers heading to a less-prosperous area – say, reverse commuting to the O’Hare area on the NCS or to Joliet on the Rock Island or Heritage Corridor – failing to get off the ground since there’s less political and financial capital to spend.

In Metra’s defense, the proposed P3 arrangement looks to be pretty solid and straightforward: Metra pays half of the annual operating expenses ($350,000 of $700,000) and $1 million towards $4.75 million of track improvements, with the private sector (Lake County Partners) paying the rest. In return, if the two-year pilot proves fiscally feasible, Metra will continue operating the service. This particular corridor already sees a significant number of reverse commutes, and it’s terrific that those businesses and communities sees the potential benefit of expanded Metra service to serve their workers.

Of course, Metra is still Metra, so the proposed evaluation is written, in my opinion, too conservatively: for the project to be considered a success, the new trains need to show a ridership increase of 300 riders a day (148,300 annual trips, or a total of 600 new daily rides on 255 workdays a year, at an average fare of $4.72 which comes out to almost exactly $700,000) AND new fare revenues of at least $700,000, so they’re covered in case the per-rider average fare doesn’t pan out. The pilot evaluation is also written to discount cannibalizing ridership on the Union Pacific North, so UP-N existing riders changing to theoretically more convenient MD-N trips won’t count towards the pilot’s success. In other words, Metra is demanding a 100% farebox recovery on this pilot, even though operational revenues are budgeted at 55% of expenses and farebox recovery is currently 54.4%. If the pilot was held to the same standard of the rest of the network, all the pilot would need to be successful is 160 new round-trip riders daily (160 x 2 x 255 x $4.72 = $385,000 = 55% of $700,000), which isn’t much more than Metra expects within the first year.

I’ll be able to dive deeper into the proposed additional service on Wednesday Tuesday when more details about schedules, publicity, and branding will presumably be made available. In the meantime, I’m genuinely excited about this, especially since I’m not expecting much in the way of other good news to come out of Wednesday Tuesday’s board meeting. This is a huge step forward for Metra, and this blog wholeheartedly endorses this kind of innovation pushing the envelope at Metra, even if we have a reservation or two. But Metra’s staff deserves credit for working out the details with Lake County Partners to get this in front of the board, and we strongly encourage the board to approve the item on Wednesday Tuesday.

(P.S. – If anyone on the board is reading this and has any heartburn about a proposed $700,000 increase in operating expenses should the pilot prove successful, please take note of CFO Farmer’s monthly financial report which will show – once again – that Metra’s operating budget is favorable to budget this year to the tune of $20 million, just through August. I’m sure he’d be able to find the $700,000 somewhere, or maybe set aside some of the end-of-year favorable operations budgeting to other pilot programs or at least fewer service cuts.)

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