New Type of TIF District Would Increase Funding for Transit Projects

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Transit TIFs in Chicago would send a majority of revenue to specific transit improvement projects. Photo: CTA

A new bill that passed the Illinois Senate last week would create a new class of tax increment financing district that could only be created around Chicago transit stations and lines to capture the property value that being near transit generates. Most of the revenue generated by these TIFs would be earmarked to pay for construction of rapid transit lines, stations, and other transit-related facilities.

In case you’re not a follower of Ben Joravsky’s TIF-centric column in the Chicago Reader, a Chicago TIF district is a designated area in which the amount of property tax revenue that goes to taxing bodies like Cook County, the Chicago Public Schools, and the Chicago Park District is capped when the district is created. Any additional tax revenue from rising property values can only be spent in that area. Chicago TIF money is currently often used to provide a local match to win federal grants for transportation projects.

The new state law, which would only apply to Chicago, would allow City Council to create transit TIFs district that would include the area within a half-mile of the following projects:

The Chicago region spends less money on building and running transit than its U.S. peer cities, and gas tax revenue has been a declining source of funding for transit infrastructure. The Illinois gas tax has been stuck at 19 cents per gallon since 1990 so, due to inflation, the buying power of the revenue it generates has dropped in recent decades. This revenue source is also impacted as cars become more fuel-efficient and driving rates fluctuate.

Under the new transit TIFs, when property values in the area increase due to an existing or planned transit facility, the additional revenue would be captured and used to fund the rehab of the existing facility, or pay for the construction of the new one. The theory is that resulting transit improvements will further increase property values and tax revenue, creating a virtuous cycle where transit keeps getting better.

If the area around the transit project is already TIFed, the new transit TIF would go into effect when the old one expires, or sooner, if the City Council votes to dissolve it early. A transit TIF district would last for 50 years, the useful life of a transit improvement, according to the Metropolitan Planning Council.

To address the issue of TIF districts siphoning money from the school district, this bill would require that CPS gets all of the tax revenue it would receive from the area if the transit TIF had not been created. Of the remaining funds, 80 percent would go to support the relevant transit project. The other 20 percent would go to the other affected taxing bodies.

Transit TIF districts could have a major benefit for improving our transportation system by providing more local funding to match federal grants and loans, which is 20 percent or more of the cost of a project. Chicago already spends millions of TIF dollars each year on new and rehabbed CTA train stations, including the renovated Grand Red Line stop, and new Morgan and Cermak stations. By creating TIF districts specifically to fund transit, there would be the potential to raise even more money for these important projects.

  • Wewilliewinkleman

    Rahm’s licking his chops. Let’s all hold our breath and see where the money really goes. Since most areas are already TIFed I sincerely doubt there will be that much funds available until the TIFs run out.

  • Kevin M

    I’m really fed up with the relentless reliance on property taxes. This trend is one big symptom of our State’s inequitable and under-performing income tax system. Therefore, I’m not very supportive of this Senate bill (though, I would gladly swap the entire current TIF program out for this one–not that this is a current option).

  • Eh… Only 74 square miles of Chicago (which is 234 square miles) is in a TIF, so about a third. That’s a rough calculation because I didn’t check to see if any of the TIFs in that figure are expired.

    But not every CTA RPM station is in a TIF, nor is the right of way. The transit TIF district law would create a 1/2 mile buffer around the project’s right of way and its stations.

    A lot of where the 130th Red Line extension would go isn’t in a TIF either (although the existing TIFs around here probably aren’t generating much at all).

    You can see the TIF districts on this map.

  • Well … at least it’s a little better than trying to do it all with sales tax. Property tax has the advantage of not being completely regressive and punching the poorest in the face while mostly letting the most prosperous off the hook.

  • goes both ways

    How does it let people off the hook? Everyone pays the same percent, sounds pretty equal. Also food is barely taxed.

  • Because the same percentage of a purchase price is usually wildly differing percentages of the purchaser’s income:

    http://www.investopedia.com/terms/r/regressivetax.asp

  • Kevin M

    Thanks for the link.

    I’ll add: even to renters, over-reliance on property taxes is a regressive tax. Higher property taxes == higher rents.

  • Khan

    Income taxes are one of the most [economically] inefficient forms of taxation; property taxes, in general, do much better. In particular, the idea of transit-oriented TIFs are brilliant in the sense that they allow the capture of some of the positive externalities generated by investment in transit infrastructure, making the investment itself viable in the first place.

  • goes both ways

    You’re example lists cigarettes, which are bad for your health I hope you’re not a smoker

  • neroden

    Well, OK, but no Circle Line TIF?
    —-

    I understand that Illinois is hamstrung by its constitutional requirement for a “flat” income tax. This means that in order to properly tax the rich, Illinois would end up overtaxing the poor. This should be changed. In the meantime, I guess you’re stuck with property tax funding.

  • Not included in the article, because it wasn’t that relevant, is that the transit TIF district can only cover up to 6 miles of a transit project.

  • what_eva

    Higher taxes don’t directly lead to higher rents. Rents are set by the market. Indirectly, sure, it can cause some landlords to sell because they can’t make money given higher taxes.

  • It would be ideal if this TIF was tied to ‘TOD’ projects to further encourage the density around transit hubs that the TIF would therefore create. Or just make it easier for projects of all types be allowed to take a parking reduction exemption by-right.

  • Unless your landlady say, “I’m sorry, I have to raise your rent because they raised my property taxes,” which happened to me not long ago.

  • MJ in Chicago

    Chicago spends a lot of TIF dollars on transit already because there are 174 existing TIF districts in the city, and they constantly port $$$ from one TIF to another and back again. It’s rare that CTA stations are located outside of TIF areas. This action will be minimally helpful in Chicago. Maybe more helpful for suburban areas who could use a lot more public transit as the population ages.

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