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.
