Going back to the future
In 2026, the Regional Transportation Authority (RTA) projected a $771 million operating shortfall across the Chicago Transit Authority (CTA), Metra, and Pace. Of that gap, roughly $605 million belongs to the CTA alone, a deficit large enough to swallow the entire budgets of many midsize cities. The pandemic’s federal lifeline money will expire, ridership remains well below pre-2020 levels, and the system’s labor and pension obligations continue to grow faster than its farebox revenue. In a city that still relies on its century-old idea of “public transit,” its finances now look increasingly unsustainable even with many firms now mandating five days in person workdays.
To understand how Chicago reached this point, one must go back to the era before the CTA existed when every rail and bus line in the city was privately owned and run for profit. Between 1888 and 1947, Chicago’s transit was an entrepreneurial patchwork of competing elevated-rail companies and streetcar operators. The South Side Elevated, Lake Street, the Metropolitan West Side, and the Northwestern Elevated all began as independent firms financed by investors who expected returns from the nickels and dimes of daily passengers. On the surface streets, a loose federation of streetcar franchises eventually consolidated as Chicago Surface Lines wove along nearly every artery of the city. For a half-century, this was capitalism in motion: fiercely competitive, often chaotic, but undeniably dynamic.
The early system’s downfall was not a lack of demand but a lack of pricing freedom. The City Council, wary of monopolistic abuse, froze fares at five cents in the 1910s and clung to that cap for decades. What had been a fair price in 1907 was ruinous by the 1930s, when wages, electricity, and labor costs had doubled. The result was a textbook case of regulatory strangulation: each company was forbidden to charge what it needed to survive, yet were legally required to keep running unprofitable routes. By the Depression, deferred maintenance had turned once-profitable enterprises into financial wards of the city. When the fare increases finally came — to seven cents in the 1940s, it was too late. Riders were defecting to automobiles, buses were replacing streetcars, and private investors had long since fled.
The fare cap wasn’t the only culprit. Another force quietly doomed private transit: the way the city defined its “franchise rights.” Every operator worked under time-limited permission to use the public streets. These rights were valuable only so long as the city agreed to renew them. Reformers, burned by the corruption of the “traction scandals” of the 1890s, wrote those franchises to expire after 20 years and to be revocable without compensation. That reform destroyed the asset value of every company. No investor would pour money into rolling stocks or infrastructure that the city could repossess. When the Great Depression came, the railways couldn’t refinance, couldn’t raise fares, and couldn’t sell their rights; the only buyer left was the public itself.
The Metropolitan Transit Authority Act of 1945 created the CTA to buy out the bankrupt companies and run the whole system as a municipal corporation. By 1947, the CTA had consolidated both the elevated lines and the streetcar network, promising modern equipment and efficient management. What emerged was not a competitive utility but a public monopoly, justified as a “public good.” The old private monopoly was regulated, reviled, and eventually ruined, but was reborn under public ownership.
The change solved one problem and created another. The city could now issue tax-exempt bonds and subsidize operations with sales-tax revenue. Fares no longer had to cover costs. That sounded like relief, but it was, in essence, cost-shifting: moving deficits from the farebox to the taxpayer. The CTA could run perpetual losses because bankruptcy was no longer possible. Its debt became the public’s debt.
This was part of a broader post-war American trend. Every major city including New York, Boston, Philadelphia, Los Angeles took its private transit monopolies and made them public monopoles instead. Economists called it “municipalization.” Politicians called it “progress.” Either way, the discipline of the market was replaced by the inertia of government. As Ronald Reagan said, “If it moves tax it. If it keeps moving, regulate it. If it stops moving, subsidize it.”
In retrospect, the franchise question is the hinge of the story. If Chicago had granted perpetual, transferable franchises like modern utility concessions, its streetcar companies could have held assets with real market value. They might have merged, recapitalized, or even sold to new investors rather than collapsing into municipal ownership. Instead, by reserving the right to “reclaim the streets,” the city made those rights worthless and ensured public takeover was the only possible endgame. Another in a long and sad history of the government coming to the rescue.
The irony is Chicago now finds itself trapped by the opposite problem. The CTA’s “franchise” is perpetual by law; the city cannot revoke it without rewriting the Metropolitan Transit Authority Act or risking federal transit funds tied to public ownership. A public monopoly that was meant to be accountable to voters has become nearly impossible to reform. Its labor contracts are entrenched under state law, its pensions constitutionally protected, and its deficits guaranteed by taxpayers who have no alternative provider. The pendulum swung from one monopoly to another and stayed there.
What replaced the profit motive was the politics of subsidy. In private hands, insolvency was a market verdict; in public hands, it became a budget line. When fares proved insufficient, the state added a dedicated sales tax; when that fell short, federal operating grants filled the gap. Each fix deferred the reckoning. The CTA’s farebox recovery ratio once near 90 percent in the 1950s is now below 40 percent. The public still rides, but it no longer pays the real cost of the ride. “Public transit” has become less a service than a social entitlement, and its shortfall is treated as a moral obligation rather than a managerial failure. The result is the $605 million shortfall.
Chicago has been here before. In 2005, Mayor Richard M. Daley shocked the municipal world by leasing the Chicago Skyway, a 7.8-mile toll bridge to a private consortium for 99 years in exchange for $1.83 billion. The city kept ownership of the assets but handed operations and toll collection to the lessee, which assumed maintenance costs and traffic risk. The deal was controversial yet undeniably lucrative: the city used the proceeds to pay down debt and replenish reserves, and the investors recovered their stake through tolls. It was, in effect, a modern version of the very franchise rights Chicago had abolished a century earlier — this time sold at a premium.
Could such a model rescue the CTA? Not directly. The Skyway is self-funding, the CTA bleeds red ink. But the legal structure of the Skyway concession points to something profound. By leasing rather than selling the bridge, the city avoided triggering the state constitution’s ban on “impairing” public pension benefits or alienating public property. The concession transferred operation and risk without violating Article XIII, Section 5, the pension protection clause that now handcuffs every fiscal reform in Illinois. A similar lease structure could, in theory, move CTA operations to a private concessionaire while leaving ownership and pensions intact. The law forbids diminishing earned benefits; it does not forbid outsourcing future service delivery. This means employees could keep their pensions but not necessarily their jobs.
That subtlety matters. Under a Skyway-style concession, Chicago could retain its transit infrastructure, the tracks, buses, and depots, while contracting a private operator to run them for a fixed subsidy over 20 or 30 years. The concessionaire would take on efficiency, risk, maintenance, and scheduling, paid partly by fare revenue and partly by availability payments from the city. Workers could be rehired under new contracts once current labor agreements expire, satisfying federal labor protections (Section 13(c) of the Transit Act) while gradually aligning costs with performance. The city’s pension obligations would remain untouched but capped to the existing workforce. Future hires would enter new plans, legally separate from the protected funds.
Such an arrangement would not be privatized in the strictest sense. It would be re-franchising the return of the 19th-century idea of private operation under public regulation. London’s bus network runs this way: the government sets fares and routes; private firms compete to operate them under contract. The result has been lower costs, higher reliability, and steady ridership. Chicago, in contrast, clings to a mid-century model that treats cost overruns as destiny. It's sad when Europe is better at something than America.
Critics will argue Illinois’ constitution makes all this impossible. Article XIII’s pension clause seems to lock the current system in place. The Skyway shows structure can matter more than ownership. The city did not “privatize” the bridge; it leased the operations. Nothing in the constitution forbids a municipality from contracting private management so long as the public retains title. Nor does the law prevent the state from defining new agencies say, a “Chicago Transit Infrastructure Authority” to hold the assets while outsourcing operations to competitive bidders. The pensions remain public; the service becomes contestable.
The story of Chicago transit began with private companies crippled by fare caps and revocable franchises. It evolved into a public monopoly cushioned by perpetual subsidies. Both models suffered from the same flaw: insulation from the marketplace. The Skyway experiment, whatever its imperfections, proved that infrastructure can be financed, operated, and maintained under long-term contractual discipline without surrendering public ownership.
The choice facing Chicago is not between public and private virtue but between stagnation and adaptation. The fiscal cliff approaching in 2026 is not a temporary shortfall; it is the bill for 75 years of political avoidance. Just as the city once reclaimed the streets from private franchises, it may now need to reclaim efficiency from public bureaucracy. A Skyway-style partnership would not solve every problem, but it could open a path around the constitutional and institutional walls that have turned “reform” into a catastrophe.
Unfortunately, we can’t go back to the future, but we can do the next best thing.
