Tuesday, December 14th, 2010

Taking Chicago Transit from Good to Great, Part Three – Cost Control and Governance

Continuing my series on taking Chicago’s public transit system to the next level, I wanted to address a few miscellaneous topics before moving on to the matter of how to pay for it. For those of you who did not see them already, click through to read part one on building the vision and part two on raising the bar on design.

Cost Reduction

I mentioned in my previous installment how we need to raise the bar on the design of the system. While some of this would be nearly free, other items, particularly L stations, would appear to legitimately cost a lot more money to do right. How do we reconcile this?

In the spirit of Burnham’s “more study, not more money” quote, I’d like to suggest we need to take a serious look at how to drive step-change reductions in the cost of heavy rail projects. Consider this: the proposed Red Line extension to 130th is 5.3 miles and $879 million – a cost of $163 million per mile – nearly $21,000 per new daily rider. This is for a line with limited ROW needs. And my numbers are very generous, since they are current year, not construction year numbers, and they exclude a $200 million yard reconstruction that is part of the project. Frankly, at those rates, highway investment actually starts to look like an attractive option. IDOT’s Dan Ryan reconstruction, which included adding a lane south from 67th or so to 95th, was about the same the cost as this proposed extension

The proposed Orange Line proposal is even more expensive on a per unit basis. It is $455 million in current year dollars for 2.26 miles – a cost of $197 million per mile. This is for 7,800 new boardings per day, or over $57,000 per boarding (likely around $100,000 per passenger assuming most people make round trips).

I’ve read of estimates up to $4 billion to renovate the North Main embankment. Just that segment would cost more than the Kennedy reconstruction + the Stevenson reconstruction + the Dan Ryan reconstruction + the Kingery reconstruction and widening + the recent resurfacings on the Edens and Calumet Expressways + the Ike bottleneck reconstruction from a while back – all combined.

I’m not saying anyone is making these up or anything, but the numbers themselves just seem way out of line.

Let’s consider some rail transit construction costs from around the world. Seoul, Korea is building a heavy rail route called the New Bundang Line as a public/private partnership. It will cost 1.1809 trillion won ($966 million) for 18.5km (11.5 miles). This is a cost of $84 million per mile – far less than Chicago’s expansions. And the New Bundang line is partially underground, requiring tunneling, and is a fully automated, driverless system with state of the art technology too. Read more here.

Madrid too has a much lower cost approach. Its Metrosur line (admittedly opened in 2003) was euro1.55B ($2.25B) for 40.5km (25 miles), including 29 new stations, six of which permit transfers with commuter rail. This is $90 million per mile, again, far less than Chicago’s proposed expansion even if you inflate the numbers to current dollars. Again, this included extensive tunneling (full on boring, not just cut and cover) in terrain where that was very difficult. See here for more info on the line, or this excerpt from an article titled simply, “Madrid confirms its low cost approach“.

Even the libertarian City Journal praised Madrid’s subway program, albeit as a foil for critiquing New York, saying, “New York might take instruction from an unlikely place: Madrid, Spain, which first opened its subway in 1919. Between 1995 and 2007, the Spanish capital swiftly and cost-effectively upgraded its subway system, building more than 150 new stations over 120 miles at costs far below New York City rates.”

It seems like every time I read about a metro line outside the United States, except in the UK, it is way cheaper than we can do. I don’t think there’s anything unique to Chicago about this. Alon Levy has contrasted the cost of subway construction in New York with the much lower costs in Tokyo, for example. We seem to have a system in the US that significantly inflates the cost of construction vs. the rest of the world. Many of the typical complaints as to why this might be would seem to have no merit. Other countries are heavily unionized and regulated, for example, so don’t blame organized labor. (South Korean unions are famously militant). Spain and Japan are not exactly low cost countries. And basically all new systems world are fully compliant with equivalents to the ADA.

Any dollar we can take out of the cost of these systems is found money. It can either be invested back into quality of design, used for more projects, or returned to the taxpayers and riders.

I would propose that we create some sort of a task force with a mandate to drive significant reductions in the cost of construction – I’m talking a target of 25-50% or greater, no excuses. This would include the CTA and FTA, but also outside experts brought in from overseas and from outside the fairly small circle of US transit consulting firms. US engineering firms need to be included, but frankly outside leadership and new seats at the table are going to be needed to really drive new thinking as these firms actually profit from higher costs. We need to examine every aspect of these systems. What is the minimum we are legally required to build? What requirements are driving excess construction costs versus overseas systems and can we eliminate them? Are there new techniques such as pre-fabrication that could drive large savings? Can we pool purchasing with NYC or elsewhere? Can off the shelf systems be used where possible instead of bespoke (admittedly, maybe difficult in an other legacy system like Chicago)? Can we use more grade level construction and street crossings instead of expensive elevated construction and viaducts? What could we do with public-private partnerships and concession agreement a la Madrid? What about real TransMilenio style BRT as an alternative to heavy rail? There would appear to be all sorts of things that could be investigated as means of materially reducing the cost of the system. Some of them might require legal or regulatory changes, but given the dollars at stake both locally and nationally, it is worth fighting that fight.

Again, we need an aggressive target for cost savings and incentives to drive results. At a minimum, someone should be able to detail why our costs are so much higher than the rest of the world’s as right now there is no prima facie reason evident.

Regional Transit Governance

Chicago has three more or less independent transit service boards: the CTA, Metra, and Pace. The RTA provides financial oversight and is also chartered with coordinating these agencies. It’s been long noted that in fact the three agencies mostly don’t cooperate that much, and there are frequent turf battles, etc.

I think a bit of this is overblown. I don’t subscribe to the idea that a lack of integration between the CTA and Metra is a major barrier to improved transit regionally. Would integrated fares and more coordinated schedules help? Sure, but that’s not the secret sauce to really moving the bar.

However, the various turf battles do lead to challenges on occasion, and the fact that these agencies are so independent in their operations leads to bad “optics” and provides ammo to those who would oppose change in the region. It’s like when the CTA had a bus on Lake St. Regardless of the merits or lack thereof of that route, it was really minor in the grand scheme of things. But it was always something people could point to as an example of misplaced priorities. (“As long as the CTA has a bus running underneath the L, I’ll never take them seriously” and such). It plays into the whole “gotcha” mentality of politics.

So this is something we should probably take a look at while putting together that vision. And there are some legitimate items that need to be addressed. Again, I won’t be prescriptive as to what that more integrated vision is, or how governance would change, just say that it ideally ought to be part of the discussion.

Unfortunately, this is likely to be the most troublesome aspect in many ways. Consider this: the CTA carries 80% of the region’s transit ridership. But the CTA gets far less than 80% of the money. This is true of the RTA tax, the stimulus, the recent capital bill, etc. Someone labeled my winning entry from the Chamber of Commerce competition as “suburb infuriating”. Actually, I’m not anti-Metra. I think they are a fantastic agency and love riding Metra trains. In fact, I budgeted for heavy increases in Metra ridership and significant investment in that system in my winning entry. The but the fact remains that the lion’s share of the region’s transportation ridership is on the CTA. All service boards aren’t created equal.

For their part, Metra also has some legitimate complaints. They’d no doubt say that since they carry passengers over longer distances, passenger-miles, not passenger counts is the best measure. There’s something to that. (Though I’d argue it leads to certain perverse outcomes such as rewarding service to far exurban areas like Elburn. Why are we using precious transit dollars to subsidize non-transit oriented sprawl developments even further from downtown? Why make it easier to live even further from downtown with this subsidy?) Also, Metra provides significant service in the city, but doesn’t receive any of the RTA sales tax in the city. It should come as no surprise to anybody that their service priorities follow the funding. And Metra is arguably the long pole in the tent when it comes to feeling the pain of transit underinvestment. As Metra trains get more crowded and turn into standing room sardine cans, this is going to very negatively affect the perception of the Loop as a business destination. It won’t take that much ridership growth to get there.

So there is a lot to consider here and it will obviously be something difficult to pull of politically, but a challenge that should be tackled along with the rest.

The “Racquet”

Lastly, I received an email followup to part one of this series from someone who had some interesting insights as to offer about why Chicagoans don’t seem to demand better transit. Presented here in an anonymized fashion.

Your discussion of what Chicagoans want or are willing to pay for vis-a-vis world-class mass transit reminds me of a concept I learned in the early ’90s.

The concept is “Racquet”. I learned of it related to organizational behavior but it sounds like the inhabitants of Chicago may have a racquet as well. A racquet is when folks have something they complain about and commiserate about but don’t fix it. Upon delving into the roots of racquets one finds that the folks don’t really want it fixed – the subject of the racquet is a unifying force that if corrected will remove the common complaint and thus the unifying force. The cultural changes that would ensue from the change in practices that “no one wants” are not acceptable to the people (the complainers).

I worked for a rapidly growing company in the early 90’s. We were a company with many cowboys. We (the top 70 leaders in the company) commiserated on any number of things. The CEO hired two consultants to help “transform” the company into a modern, international company with cohesive leadership. They introduced us to the “racquet” theory. In corporate organizational behavior, it is important to break the racquets. It is also difficult. But, I imagine far easier in a company with some semblance of common objectives that it would be in a each-man-for-himself city.

More Chicago

Chicago Transit: From Good to Great
Part 1: Building the Vision
Part 2: Raising the Bar on Design
Part 3: Cost Control and Governance (this post)
Part 4: Paying For It
Part 5: Getting It Done

Other Transportation Related Articles
The Urbanophile Wins Chicagoland Chamber of Commerce Transit Competition
Transportation and the Burnham Plan
Metropolitan Linkages (high speed rail benefits case)
High Speed Rail (implementation)

This post originally ran on September 15, 2009.

6 Comments
Topics: Transportation
Cities: Chicago
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6 Responses to “Taking Chicago Transit from Good to Great, Part Three – Cost Control and Governance”

  1. Danny says:

    There are no silver bullet solutions to higher costs in the US because there are no solitary reasons why costs are higher…it ends up being a little bit of everything.

    Labor costs are far more of an issue for transit operations than they are for construction, but they are still an issue regardless. And while I realize other countries also have unions, the word “union” can’t be used interchangeably with “higher costs”, at least some of the time. There are qualitative differences between union practices that greatly change cost structures.

    To give an example, take BART vs NYMTA. BART has extremely high labor costs, but their labor costs come mostly from wage rates + inordinate amounts of overtime. Their union rules basically let the union decide when more labor is needed, and thus they choose to not hire in order to give themselves more overtime. NYMTA doesn’t have that same problem, but rather quite the opposite. While their wage rates are also high, their labor costs are mostly the result of low productivity. Their unions are more concerned about preserving the number of members rather than those members’ earnings, and as a result we get trains that have a staff of three where in other parts of the US they would only have a staff of one, and in some parts they would have less than one (driverless trains with centralized surveilance).

    In both cases, the wage rates themselves are high, but high wages are a tiny part of the problem…work rules are the real problem. And in other countries where there are still unions, those unions can act completely different. In fact, there are plenty of examples of unions that take pride in extremely high productivity…which ends up lowering costs rather than raising them.

    The bespoke v off-the-shelf problem is also very pervasive in the US. We tend to want customized images and performance levels and styles. This goes for rolling stock and station design especially. The difference in price between off-the-shelf design and customized design for rolling stock can be between 50-100%, sometimes even more as is the case with BART. Station design can be even more, depending on whether you want the architect down the street or Santiago Calatrava himself.

    Some problems are very rarely visible in how they affect different countries. For example, in many European countries, the standard practice for titled land property is that you get a specified amount of subsurface, plus ground and air rights. Sometimes it is slightly different…you basically get unlimited subsurface with the government automatically holding an easement on any subsurface below a certain level. But in the US, we almost always give unlimited subsurface rights…which doesn’t even make sense from a geometric perspective. The result is that in the US, subway construction can often include eminent domain takings that would have never occurred in another country.

    So I guess my point is that in the US, the cost problem is “a little bit of this, a little bit of that”. But, IMO, the underlying problem is sociopolitical…we don’t care enough to hold our government responsible for inefficiency. Most of our problems could be fixed with a very tiny tweaks to mostly invisible systems…but we don’t even care enough to identify problems, let alone find solutions.

  2. Wad says:

    Danny, we can’t have off-the-shelf anything for rail projects because there is no such thing in the U.S.

    All facets of rail service, from station construction to cars themselves, are custom-engineered and -built.

    There was only one rail project in the U.S. that was built off-the-shelf. That was the early San Diego Trolley. It was the only system that was able to pull off what it did.

    The first generation of cars were bought and imported direct from Siemens in Austria. The other advantage, in one that very few systems say they can have, is San Diego had an extant, usable right of way between Downtown San Diego and Tijuana — which happened to be the busiest travel corridor in the county. San Diego just poured some concrete slabs for stations and that was that.

    There’s no other city that has the same assets.

    The other problem is that apart from track gauge, there is really no single design specification that allows for commodified design. The U.S. did it right with controlled-access highways, but there isn’t anything similar for an urban rail transit project.

    You don’t have standard platform heights, so you can’t have standard car designs. Therefore, every car has to be redesigned for the slightest variations. You also don’t have standard electrical currents for projects, so cars would have to be rewired if they happened to find a place where they can be used.

    Commuter rail does have one that kind of emerged unintentionally. It has a lot to do with what we started in L.A. with Metrolink. Generally speaking, commuter rail involves using mainline railroads, and the “killer app” of passenger cars has become the Bombardier bilevel car.

    Unfortunately, with commuter rail, you get a somewhat lower capital cost in exchange for higher operating costs and much more limited service to riders; in many cases, rush hour service in the peak direction only.

  3. david vartanoff says:

    a few corrections about “off the shelf” First, most US transit was built to run on 600 VDC. Second, dimensional clones of the Duewag San Diego cars are the de facto standard for “light rail” systems. In fact when San Jose VTA decided to go all low floor, they sold off their young high floor stock to Salt Lake IINM.
    In terms of older systems, the Broad St Subway in Philly was deliberately built to BMT/IND dimensional specs, thus if SEPTA cared to, the next order could be clones of NYC stock. When SEPTA was short of serviceable cars for the Norristown route, they bought CTA cars to fill in.
    And although nominally separate systems, it is said that PATH and IRT cars could cross operate as far as dimensions and voltage.

  4. Chris Barnett says:

    I’m puzzled by the suggestion that San Diego is the only place in the US with suitable existing surface ROW for streetcar or LRT on in-demand routes.

    Indianapolis has many extra-wide street ROWs…because there used to be streetcars and interurbans running on them. In most cases the railbed is still there, and in some cases even the rails, along with the original brick street below today’s asphalt. In other cases, there are abandoned class I freight rail lines, or lightly-used lines. And I’m sure Indianapolis is not alone in this.

    Danny, the specific issue Aaron highlighted is capital cost per mile, not operating cost. Union labor is indeed a significant issue, as any Federal-dollar project requires paying “prevailing” (i.e. union) wages whether or not the contractor is a union shop. Another issue is that invisible stuff you mention: leadtimes for appropriations, plan approvals at multiple government levels, historic and environmental reviews, and any local zoning and approval (all of which add non-negligible inflation to construction costs).

  5. Brian says:

    Yep, it’s not just San Diego. St. Louis had assets in an abandonned railroad right-of-way, tunnels beneath its CBD, and even a bridge over the Mighty Mississippi. Not surprisingly then, the first LRT line there (opened in 1993), despite its metro-lite characteristics, was still built for only $20 million a mile. The last extension to Clayton, where new tunnels were constructed and an urban expressway reconstructed, ended up over $80 million a mile.

    I like the comparison between interstate design standardization and design variance on LRT projects. Perhaps if the Feds would actually fund 80% of transit projects, as they do highways, there would be more value-engineering and standardization in design.

    Back to that relatively cheap St. Louis metro-lite project, the Feds actually footed the full bill, since those local assets were actually counted as their local match, plus at time when transit projects could count on more than 50% Federal match.

  6. Alex B. says:

    One plausible reason for a great deal of the cost increases: blame the Feds.

    http://www.oregonlive.com/news/oregonian/steve_duin/index.ssf/2010/12/knocking_the_lake_oswego_stree.html

    “Interminable and ridiculous sums up the federal process,” says Judie Hammerstad, the former Lake Oswego mayor. “Portland circumvented it with its first streetcar by not asking for federal funds. We don’t have that luxury.”

    In exchange for this needlessly complex review, the feds pick up 60 percent of the project cost, which has been mischievously pegged in the vicinity of $458 million.

    Where’s the mischief? That figure is in 2017 dollars. It includes $95 million for the value of the right-of-way. It’s based on the 11 streetcars the project will need in 2035, not the six it needs to get started.

    Obletz estimates the real cost of the project to top off at $241 million, with local partnering agencies required to pay somewhere between $50 million to $80 million.

    Just an estimate, mind you, but there’s your 50% cost reduction.

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