CTA

The MTA has frequently come under fire for its real estate holdings. Politicians and advocates believe that the authority doesn’t make proper use of the space it both rents and owns, and underground, commercial opportunities are decidedly low rent. It is a problem the MTA is trying to solve in order to generate more money.

A few weeks ago, news broke that the authority may try to offload some real estate holdings as part of the overall overhaul of the way the MTA works. Meanwhile, back in November, MTA CEO and Chairman Jay Walder spoke to me about the need to find a more diverse and appealing group of businesses willing to take out space underground. It’s a process.

In Chicago, the CTA is engaged in a similar process, and the Windy City’s Tribune profiled that authority’s real estate overhaul. Jon Hilkevitch reports:

The Chicago Transit Authority, which has its hands full running trains and buses, concedes it has no business managing the retail concessions on its properties. Sixty-six of the 137 concession spaces at CTA rail stations are vacant, according to the transit agency. Commuters aren’t exactly missing their trains to buy the snacks and refreshments available at the open concession stands either.

The grimy appearance of CTA subway tunnels extends up the escalators to many of the vendor stalls, which haven’t been overhauled in decades. A campaign is beginning to upgrade the selection of offerings to commuters and boost CTA rental income by attracting new retail tenants, including national chains that would operate rail station stores in multiple CTA stations, officials said…

Commuters may soon be able to drop off their dry cleaning, conduct other business or just buy a cup of coffee right inside or next door to their “L” stop. The two newest leases are with Maui Wowi Hawaiian, a coffee and smoothie shop that will open at the CTA Belmont station serving the Red, Brown and Purple/Evanston Express lines; and Lupito’s juice bar at the Damen station on the Pink Line, officials said. Both businesses are scheduled to open this spring.

Upscale merchandise could become part of the mix too. Vending machines that feature iPods and digital cameras are deployed at increasing numbers of airports, and they may turn up at CTA rail stations as well. The CTA is considering vending machines that dispense DVDs and electronics at select rail stations, CTA President Richard Rodriguez has said.

There’s more than a little amount of common sense involved in the CTA’s thinking. While many of their stations have a more visible ground-level component than New York’s do, the simple idea of placing vending machines in stations could be one that tips. Why shouldn’t I be able to grab a DVD from a Redbox machine at Grand Army Plaza? If the MTA can maintain its MetroCard Vending Machines and if my local Key Food can keep in better working order than its credit card readers, convenience would demand one in the subway.

Of course, the idea that the subway is for anything other than commuting is tough sell. Other than concession stands, businesses aren’t drawn to the subways because of its negative connotations. It’s dirty; it’s dark; it’s delayed. I prefer my dry cleaners to inhabit a clean building with some modicum of proper venting instead of the dirt- and rat-infested subway system.

Still, money is tight. Transit agencies have to get creative with their rent-seeking efforts, and perhaps Chicago is on to something. As New York searches for a similar solution, they could do far worse than to take a cue from our neighbors to the west.

As transit economics and funding go, we are not living in a golden age. State and city contributions to their public transit systems are on the decline, and as both operating costs and pension obligations climb, transit agencies have left no stone unturned in their quest for revenue. From service cuts to fare hikes to internal reorganization, if the move saves dollars, it’s on the table.

For many transit agencies, advertising remains one of the last great untapped resources. In New York, the MTA draws in over $125 million annually, up from just $36 million in 1997, and yet, the ads we see in subway cars and on buses are often poor in quality. Considering the captive audience, I have to believe transit agencies could be doing a better job of selling space to companies willing to pay a pretty penny for the eyeballs.

Outside of traditional in-car display advertisements, train car wraps and station treatments, naming rights remain a potential, if controversial, source of revenue, and over the past few years, we’ve seen American transit agencies awkwardly and tentatively embrace station naming deals. The MTA faltered in its first attempts when Citi Bank refused to pony up the dollars to name the 7 stop at Willets Point after Citi Field, but it secured a 20-year, $4-million commitment from Barclays to append the name of the Nets’ new arean to the Atlantic Ave./Pacific St. hub. Other than that one failure and one success, all has been quiet on the naming rights front.

Outside of New York, transit officials have engaged in stop-and-go efforts to secure naming rights. In Philadelphia, the Pattison Ave. station at Broad St. has been renamed the AT&T stop. By removing the geographic identifiers from the station name, SEPTA has made it harder for those unfamiliar with the system to reach their destination, and I have long believed the Philly approach is the wrong one to take for station naming deals.

In Chicago, something new and different is emerging. A few weeks ago, the Chicago Transit Authority reopened the renovated North/Clybourn station, and the ceremony was significant because Apple, the computer giant which was opening a store nearby, had paid for the station renovations. The deal Apple signed with the CTA allowed them right of first refusal for the station name if the authority were to sell the naming rights, and now it appears as though the CTA is prepared to do just that.

As Mary Wisniewski of The Chicago Sun-Times reported yesterday, the CTA board has begun to explore corporate naming rights deals. She writes:

On Wednesday, the CTA board asked for bids from firms that would help seek corporate sponsorships to bring in revenues beyond what the CTA already gets from ads on buses, trains and stations.

The deals could involve naming rights or other ideas, such as sponsorship of the CTA’s planned bus rapid-transit route on the Jeffery corridor or the New Year’s Eve “penny-a-ride” program. “I’m not looking for your traditional commitment to just advertise more on the system,” CTA President Richard Rodriguez said. “I’m looking for creative ideas.”

Rodriguez said he was in London on a speaking engagement earlier in the year and realized that across Europe, transit systems are looking into sponsorship ideas. “I can’t even imagine what the opportunities might be,” Rodriguez said. The firm would be paid a portion of the revenues it generated.

For U.S.-based transit, Chicago’s bidding results could be a harbinger of things to come. If companies are willing to pay money to secure these naming rights, there is absolutely nothing stopping other transit agencies from jumping onto this fiscal bandwagon. Rodriguez, the CTA’s head, doesn’t know what to expect, but at least some prominent companies will bid for high-traffic stations or prominent events.

As transit agencies, then, head into uncharted territories, how best should they structure these naming rights deals? Sports stadiums, for instance, have embraced corporate names but have sacrificed any local identity. Would a casual fan know that the Cincinnati Reds play in Great American Ballpark? Where is the Wells Fargo Center and which teams play there? Few people outside of Philadelphia could answer that question.

So the right approach involves appending instead of replacing. Renaming Times Square, originally a corporate name in its own right, to the Walt Disney Station does no one any favors, but calling it Times Square/Walt Disney, while painful to see, doesn’t remove the key geographical signifier. Since a transit system is in the business of getting people from Point A to Point B, it must ensure that people know where Point B is.

Other than that, all bets are off. Whether any substantial amount of money can be generated from these potential deals though remains to be seen.

The CTA's North/Clybourn station shown before and after the Apple renovation. (Photos by flickr users Audrey Leon and Kevin Zolkiewicz. Click the image to enlarge.)

The Chicago Transit Authority’s finances aren’t in much better shape than those of our beloved and hated MTA. The Windy City’s own transit system doesn’t have a fully funded capital plan, and the agency recently had to go hat in hand to Springfield for permission to issue bonds that will help balance the budget in the short term. Yet, it recently enjoyed a first of sorts. For a cost of $0 to the CTA, the North/Clybourn station in the city’s Near North Side area received a full overhaul. A private partner picked up the $4 million tab.

That private partner, you see, had an economic interest in sprucing up the neighborhood. To much fanfare, Apple recently opened a new store in the rapidly gentrifying neighborhood and hammered out a deal last year with the CTA that mirrored a sponsorship agreement. In exchange for the advertising space inside the station, a right of first refusal should the CTA sell the naming rights and use of a nearby bus depot, Apple paid for the station renovation.

Mary Schmich, news columnist for the Chicago Tribune, went underground on the day of the opening last week and explores what $4 million buys these days. She writes:

Outside, the station has clean new brick, big new windows and a sleek new look, partly 1940s and entirely 2010. The inside isn’t stylish, but it’s improved. Someone has scrubbed the red concrete floors, brushed red paint on the old railings, tried to wipe the grime from the escalator stairs. And the Apple name is everywhere, except out front.

From the moment you push through the turnstile, Apple ads beam at you, as bright as searchlights. Down in the tunnel, all the other ads are gone. Apple expressed interest in calling it the Apple Red Line stop. The CTA, which is exploring the possibility of selling naming rights to its stations, said Apple would get the right of first refusal for this one.

Even if you like Apple products, Apple’s master-of-the-universe attitude can be annoying. And the branding of everything can feel like mind control. But Apple has created a unique space in Chicago: handsome, communal, connected to the city, a space that makes public transportation attractive. The CTA may as well profit from the inevitable. Sell Apple the naming rights, for a big chunk of change. People are going to call it the Apple stop anyway.

As is obvious from the two photos atop this post, the station both needed and benefited from this rehab project. The outside — seen at the bottom of this IFOAppleStore.com post — appeared dilapidated with peeling paint and boarded-up windows. It now has a fresh interior, and the exterior has been completely overhauled. This is a subway station that screams for attention.

Now, not everyone is as in love with the station as Schmich is. Kevin O’Neill, a writer with Chicago Now’s CTA Tattler site, bemoans the bright lights that emanate from Apple’s advertising. But by and large, reviews have been favorable, and Chicago-based transit riders are urging the CTA to explore more public-private station-based partnerships.

All of this leads me to the same question I had when the project was first announced almost a year ago: When will the MTA hop on board with these types of partnerships? It’s true that the authority will append the Barclays Center name to the Atlantic/Pacific subway stop when the Nets’ new arena opens, and it’s true that Forest City Ratner is funding some transportation upgrades to that busy Brooklyn hub. But Ratner purchased the Vanderbilt Yards air rights well under market value. The least he could do is fund some transit upgrades.

For New York, a partnership of this magnitude would make sense along Manhattan’s Far West Side. As the 7 line extension inches forward — and crawls past 41st St. and 10th Ave. without a stop — real estate developers are going to benefit. Walking around the area reveals numerous new developments waiting for tenants, and easy transit access will only increase the value of these apartments. If the MTA can work out a deal with developers who stand to benefit from increased transit accessibility, our city’s cash-strapped authority could supply that better service.

As the authority struggles to stay afloat and struggles to realize new revenue streams, these partnerships may just be an integral part of transit development over the next few decades.

A few months ago, the MTA unveiled the details of its first subway station naming rights contract. For $200,000 a year over 20 years, Barclays will attach its name to the Atlantic Ave./Pacific St. stop. Once — or if — the new Nets arena opens at that location, the station will become Barclays Center/Atlantic Ave./Pacific St. It is geographically accurate, if a bit unwieldy, and we all know that the MTA needs the cash.

Additionally, we’ve often discussed expanding the MTA’s economic horizons by instituting an Adopt-a-Station program. Similar to the Adopt-a-Highway program in place across the nation, local businesses would pay to get their names on the station. These businesses could then be responsible for ensuring the cleanliness of subway stations or the money could go toward renovation and rehabilitation projects at that station. It is an unorthodox call, to be sure, but not out of the realm of the ordinary.

In fact, that is just what the Chicago Transit Authority may do. According to a CTA spokesperson, Apple and the Windy City’s transit authority are in talks to have the computer giant sponsor a station rehab. Lewis Lazare of the Chicago Sun-Times reports:

A CTA spokeswoman confirmed that the transit authority is in talks with the computer and iPhone behemoth about a deal that could net the cash-strapped CTA as much as $4 million in funding from Apple to pay for an upgrade of the run-down subway station at North and Clybourn, which is adjacent to an Apple retail store now under construction and expected to open next year.

In exchange for its millions, Apple would receive first dibs on any and all advertising that eventually goes up at the rehabbed subway stop, which would allow Apple to create what is known as a “station domination” advertising effect at the North and Clybourn station.

According to Lazare’s report, the funding deal would not include naming rights. Chicago is not yet ready to turn over the names of their El stops to private corporations.

For Chicago, a deal of this nature makes perfect sense. The CTA is in worse financial straits than the MTA and has recently proposed massive service cuts and a 30 percent fare hike. They desperately need any money they can get.

So again, though, I propose this idea for New York. At some point, the MTA should seriously considering looking at local business investment in subway stations. The agency’s new modular approach to station rehabilitation and component replacement is a bid step in the right direction and helps alleviate the nearly unattainable State of Good Repair for the system’s stations. With a little bit of creativity, the money though is out there, and we need not look further than Chicago and to Apple for proof.