CTA funding plan for $3.6 billion Red Line extension uses almost $1 billion in property taxes

Sun-Times Media Wire
Wednesday, August 3, 2022
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CHICAGO -- Chicago Transit Authority wants to help fund a long-stalled extension of the Red Line by creating a new tax increment financing district sure to face an uphill battle in the City Council.

The $3.6 billion project will extend the Red Line to 130th Street from its current terminus at 95th Street. The CTA must come up with $1.44 billion, and plans to raise $950 million of that with a transit TIF similar to one created to fund a Red Line rehab on the North Side.

The CTA hopes to secure $2.16 billion from a federal grant program called New Starts, which helps fund rail extension and new line projects across the country. To qualify for the grant, the CTA must find local matching funds for the other 40%.

That's where the new transit TIF would come in. TIFs use the growth in property taxes within a designated area to help fund public projects. Tax collections in the TIF district are frozen at a certain level; that money is used by the city as usual, while any growth in property taxes - the "increment" - goes into the TIF fund.

But there's a key difference compared to the North Side project, which created a TIF district in the area being served by that project.

Instead, the South Side transit TIF district, roughly eight blocks wide, starts at Madison Street in the Loop and runs south to Pershing Road - ending far from the project area.

The net effect is to funnel $950 million in property taxes out of areas in and near Downtown to help a stretch of the Far South Side.

The Red Line extension would add 5.6 miles of rail and create four new stations past 95th Street - at 103rd Street, 111th Street, Michigan Avenue (near 116th Street) and 130th Street near Altgeld Gardens.

The idea behind creating a TIF outside the project area is the expansion benefits the entire Red Line.

"Red Line Extension is an equitable investment that supports a stronger Chicago for all," said Catherine Hosinski, a CTA spokeswoman. "Investing in all communities brings economic resilience and stability to the entire city. It also creates sustainable transportation options, which supports critical climate and sustainability goals."

The proposed transit TIF boundaries are drawn specifically to generate only enough money to support the share of the local funding, Hosinski said, and to exclude existing TIF districts.

Transit TIF legislation passed by the Illinois General Assembly in 2016 specified such districts could be created for only four projects, which includes the Red Line extension.

"CTA riders will benefit from having a new railcar yard and maintenance facility, which will contribute to better reliability and consistent service - the same kind of benefits Red Line riders will see from the Red and Purple Modernization improvements on the North Side," Hosinski said.

Extending the Red Line also will better connect Far South Side residents with potential jobs. Commuters starting at 130th Street will get to the Loop 30 minutes sooner, the CTA estimates.

The North Side transit TIF was passed in 2016 by the City Council.

That move set a precedent, as the council was letting state and federal governments off the hook for bankrolling 100% of new and improved mass transit.

At the urging of then-Mayor Rahm Emanuel, alderpersons hastily authorized the transit TIF, which would provide $622 million in local matching funds. They were racing at the time to nail down $1.1 billion in federal funds before then-President Barack Obama left office.

At the time, Civic Federation President Laurence Msall warned of the pattern being set - and the pressure being placed on beleaguered Chicago property owners - by the city's decision.

On Tuesday, Msall said his biggest concern about the new plan is that it "moves us away from the gas tax as a primary source of funding" of mass transit projects. That's even after Illinois has the highest gas tax in the nation and the state constitution was amended to say the gas tax can only be used for transportation projects, Msall said.

CTA officials say they have support for their plan in the council, but some members who talked to the Sun-Times worry about another transit TIF.

Far South Side Ald. Anthony Beale (9th) has long been the council's biggest champion for a Red Line South extension, which has been promised to his residents for decades.

But Beale said creating a transit TIF between Madison and Pershing is a "horrible idea," calling it "robbing Peter to pay Paul."

The extension, he said, "was supposed to be 100% paid for by the federal government at no cost to the people of Chicago. TIF was never on the table."

"The promise was this would not be a burden. To flip the script and try to create this massive TIF is unheard of. I don't think any of my colleagues support it," Beale said.

Capturing property tax growth as far north as the Loop and using that windfall to extend the Red Line South runs contrary to the very definition of a TIF, argued Beale, one of Mayor Lori Lightfoot's most vocal critics on the council.

"A TIF is supposed to be for development. The increment from the development will pay for itself. That way, it's not a burden on the taxpayers. This is going to hit the taxpayers of Chicago. That's the difference in this TIF," Beale said. "They're grabbing increment to pay for something else someplace else. They're gonna try to capture the increment of existing businesses that have nothing to do with development of the Red Line."

CTA officials contend there wouldn't be any increase in taxes.

"One's property taxes will not change because their property is in a Transit TIF," Hosinski said, and the TIF supporting the Red Line extension "is not an additional tax levy."

If it clears the necessary hoops, the plan will go before the City Council by the end of the year.

Ald. Pat Dowell (3rd), chair of the council's Budget Committee, had no immediate comment on the proposal to create yet another transit TIF.

Downtown Ald. Brian Hopkins (2nd) said an "under-the-radar" change in the state TIF statute approved by the General Assembly in 2021 paved the way for a transit TIF that would "import money from one end and spend it in the other" - and "that's exactly what's happening" here.

"The money for this project will be generated between Madison and Pershing ... and it will all be spent at 130th. That wouldn't have been allowed previously," Hopkins said.

Despite Hosinski's assurances, Hopkins asserted the boundaries of the proposed transit TIF overlap with some existing tax increment financing districts.

Hopkins said he was assured existing TIFs would lose no money, and only new growth in property taxes would go to the Red Line project, "but I'm skeptical."

He also argued Chicago shouldn't "let the federal government off the hook."

"A transit project like this - especially one that is targeting an underserved community - should be at least 80% federally funded. We should not be having to pay for it with local property tax dollars," Hopkins said.

"It goes down a path that we don't want to go down. I wonder if we're giving up too easily on being able to maximize the federal amount of money that could pay for this."

Hopkins also noted the transit TIF created for the Red Line Modernization was supposed to be a "one-off," designed to secure a "substantial amount of federal money on the table in the waning days" of the Obama administration.

"Those conditions don't apply in this case, so I would only support this if we've exhausted all other opportunities."

(Source: Sun-Times Media Wire - Copyright Chicago Sun-Times 2022.)