In an effort to secure federal matching funds to support Chicago Transit Authority (CTA) projects, a new Illinois law has established special transit tax increment financing districts (TIFs).
TIFs work by allocating a set amount of the projected increases in tax revenue and using that money for the initial construction. Increasing taxes on private land values to generate the necessary income for TIF infrastructure improvements has the added benefit of letting the costs of the initiative be financed out of the windfall for the private property owners where the development will take place.
The additional funds, along with federal matching dollars, will go to help expand and modernize Chicago’s subway and elevated system.
Proposed CTA projects that could now receive funding include a Red-Purple Line modernization project and a controversial overpass designed to deal with projected ridership increases. That overpass would require building demolitions.
In addition, CTA has expressed interest in funding a renovation of Union Station and the Blue Line’s Forest Park Branch, and extending the Red Line south of 95th Street. The TIF districts will create a pool of local funds that Chicago Mayor Rahm Emanuel and the city council could potentially use to match federal funding for approved projects.
Illinois’s share of the transportation funding was approved following contentious state budget negotiations that approved a stopgap budget and prevented an impending transportation funding shutdown.
The Chicago TIF district proposal, supported by the city’s Metropolitan Planning Council, was an integral part of the last-minute compromise in the overall state budget negotiations because of the risk that the state would leave potential federal matching funds unspent without an agreement. Mayor Emanuel was granted discretion to apply TIF districts to properties up to half a mile from the length of the 46 miles of track. The agreement could potentially remain active for up to 35 years.
While TIF districts allow for revenue capture without the need for initial expenditures, they are sources of potential criticism for how they might distort revenue distribution. In particular, schools often rely on property taxes, and expanding public transit to an area while siphoning off some of the value added by the increased density may prevent schools from receiving the revenue that they need to cope with additional students.
The compromise Illinois budget legislation attempted to alleviate this concern by allotting the majority of the projected increased property tax revenue to schools.
About the Author
Jeff Bates is APA's state government affairs associate.
Top image: The Chicago Transit Authority Blue Line station at O'Hare airport, opened in 1984, was designed by Helmut Jahn with his firm Murphy/Jahn. Photo by Flickr user cta web (CC BY-NC-ND 2.0).