Let’s you and him pay to maintain my land value

Chicago Metropolis 2020 has issued a new report about Illinois transportation. (Right now, the report is on their front page; I don’t see a permanent link.)  Their stated objectives are things I support, including better and more attractive public transportation as well as a more efficient freight system.  They acknowledge that coordination and planning need to be improved, and that good transportation is an important component of a strong economy.

They also point out that much of the current system is in bad shape, and that billions of dollars would be required to bring it up to a reasonable standard.  They quote estimates of $45 billion over ten years to refurbish and expand Chicagoland public transportation, and $171 billion over 30 years for transit and highways statewide. They propose to pay for this using an increased motor fuel tax, increased and more market-sensitive tolling, and innovative financing techniques (about which more is below).  They do not claim that these sources would be fully adequate to the “need.” (My own opinion of fuel taxes is that, yes, they ought to be increased, but whatever amount is raised should be devoted to the budget of the military, who spend a lot of money attempting to maintain petroleum supplies. )

They observe that Chicagoland’s transit agencies don’t work very well, and suggest a restructuring tho they don’t recommend a specific setup.  They also want an Illinois Freight Authority because apparently IDOT is incapable of planning, advocating for, and funding needed improvements.

Land Value Considerations

They do acknowledge (page 49) that

Developing transit capacity throughout the state will increase economic activity, reduce road congestion, provide alternatives to driving, reduce fuel consumption, and increase the value of property in areas served by transit.

It would, of course, be more precise to say

Improved transit will increase economic activity, reduce road congestion, provide alternatives to driving, and reduce fuel consumption, and this will be reflected by an increase (or lesser decrease) in land values in the areas served by transit.

And if Chicago Metropolis 2020 sought to have transit improvements paid by those who benefit from them, they would have further said

The increased land value, or more precisely land rent, should be collected as needed to fund the cost of improved transit

Other LVT Advantages

There are other advantages to funding transit improvements from land rent or a land value tax (LVT). One is that it discourages withholding of land for speculative purposes, leading to more compact and convenient land use configurations. Another is that it tends to increase economic activity in depressed areas, both by encouraging use of well-located land and by avoiding penalties on productive activity.

One more advantage of LVT, particularly relevant here, is that it eliminates any justification for public debt. Capital improvements can be paid from a levy on land value.  If landowners cannot afford the levy, loans can be offered, but this would be private debt, not public.

Danger: Innovative Financing

The reason this is important is that the present report recommends use of “innovative financing techniques” to fund investments which beyond those which proposed new or increased taxes cannot cover. And what are these techniques?

  • Grant Anticipation Revenue Vehicles (GAR VEE s) (borrow money now, pay it back from future federal subsidies.)
  • State Infrastructure Bank (the state provides loans, or loan guarantees, for projects)
  • Transportation Infrastructure Finance and Innovation Act (TIFIA ) Direct Federal Credits (Federal government provides loans, or loan guarantees, for projects.)

In short, all of the “innovative financing” involves additional debt taken on by state and federal governments.  If this was ever a good idea, it certainly isn’t now.

How About Real Innovation?

Failure to consider LVT isn’t the only important idea missing from this report.  If we need to spend $171 billion on our transportation infrastructure, maybe we shouldn’t just spend it to patch up and extend the existing system of roadways and railways.  Maybe something entirely new can do the job better, for less money.  My own inclination is for some sort of PRT-like system.  This is something new, something different from what folks are accustomed to, but apparently capable of a much much better quality of service than what we have now.  (RTA experimented with a bastardized version of it a couple decades ago, but bungled the test so that it would be too expensive.) If we have elected competent and trustworthy government officials, we will have confidence that they can properly evaluate such an innovative system, and apply it appropriately for our region.  And if we haven’t, I guess we can only blame ourselves.


There’s lots more in this report.  They talk about “maintaining our air superiority” (meaning commercial aviation, apparently not attack craft).  They like high speed rail, and connecting buses, and transit downstate, and broadband everywhere.  But there’s no mention of the concept of putting public facilities exclusively in transit-accessible locations, and refusing to build large free parking lots to serve them. Apparently it’s easier to suggest spending money, rather than refraining from doing so.

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