CHICAGO -- The head of the Regional Transportation Authority in northeastern Illinois last week proposed a major consolidation of transit services to avoid an anticipated budget shortfall of at least $84 million over the next two and a half years.

Gayle Franzen, the authority's chairman, said combining the authority's operating divisions into a single service entity would save more than $40 million a year. The Chicago Transit Authority, Metra suburban trains, and Pace suburban buses are the divisions.

"By combining marketing, legal, legislative, planning, information services, and other similar functions which are now being quadruplicated throughout the Regional Transportation Authority, Chicago Transit Authority, Metra and Pace, we are confident that the region can save a minimum of $40 million each year," Mr. Franzen said in a press release.

He added that the consolidation would eliminate the need for "painful service cuts and fare increases" as well as a tax increase over the next several years. The transit system is supported in part by a 1% sales tax in Cook County and a .75% sales tax in five other counties.

According to a study released in March, the authority could face an operating deficit in 1995 because costs would be rising faster than revenues. Authority officials at that time said such a scenario would only happen if the authority takes no action to increase revenues or cut expenses.

The authority, which was formed by the Illinois General Assembly in 1983, would need legislative approval to implement Mr. Franzen's plan. According to the press release, Mr. Franzen, who is also a senior vice president and manager of public finance in the Chicago office of Donaldson, Lufkin & Jenrette Securities Corp., has asked the legislature to consider his proposal during its current session.

On Thursday, Gov. Jim Edgar voiced doubts that the proposal would see any action in the legislature, which is scheduled to adjourn June 30 after it completes work on the state's fiscal 1993 budget. While he declined to comment on the proposal itself, he said it has been given a "cool" reception by legislative leaders.

Judy Erwin, a spokeswoman for Senate President Phil Rock, D-Oak Park, said the senator did not think Mr. Franzen's plan was "practical or doable."

Spokesman for House Speaker Michael Madigan, D-Chicago, House Minority Leader Lee Daniels, R-Addison, and Senate Minority Leader James Philip, R-Elmhurst, said the legislative leaders needed more time to review the consolidation plan.

The plan already has found opposition from two of the authority's three operating divisions. Spokesmen for both the Chicago Transit Authority and Pace said their divisions did not support the proposal.

At Metra, spokeswoman Marla Karlin said the division would not have a response "until we receive a more formalized proposal" from the authority.

Meanwhile, the authority is anticipating pricing a $218 million general obligation bond issue during the first week of June, according to Frederick Ollett, the authority's assistant executive director for finance and administration. The issue has been delayed for a few months due to litigation over awarding a contract to build rail cars financed with bond proceeds.

Officials from Standard & Poor's Corp. and Moody's Investors Service said they will examine the consolidation proposal as part of their deliberations on the upcoming bond issue's rating.

The $200 million of debt the authority has sold since 1990 for its capital program is rated AA-minus by Standard & Poor's, and was upgraded to A1 from A by Moody's last November.

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