Category: Chicagoland

Legitimate academic to study transit funding

Lincoln Institute reports that they have granted a fellowship for work on Sustaining Mass Transit through Land Value Taxation: A Case Study of Chicago. Lincoln requires registration (free) to read the article that says the project will focus on the South Chicago USX site but will also “estimate the impact of transit accessibility on land values in the Chicago metropolitan area.” MIT Graduate student Shan Jiang will work with Prof. P. Christopher Zegras on the project.

From what I can find, Zegras has done quite a bit of work on transport funding, mainly in Latin America, and doesn’t seem to have any particular interest in land value. Although I have already estimated that RTA-funded rail transit alone generates something over $1.3 billion land rent annually, Zegras will have greater financial and technical resources and should be able to develop a better estimate. We shall see.

Transit funding will cost >80,000 jobs

That’s the estimate I came up with in the revised and quite enhanced version of HGS Research Note 5a. I’m using parameters estimated several years ago in a study of the Washington, DC, metropolitan area. Maybe the actual number here would be a lot more; I wish someone would do the analysis. This loss is expected to occur by 2014; further losses would follow.

If RTA really needs the funding, I estimate we could do it with a land tax that would cost the typical homeowner maybe $40/year, with renters essentially paying nothing. For $290/year, the homeowner could do away with all transit taxes, and fares too. No jobs would be lost; some would be gained.

By comparison, Chicago Metropolis 2020, in their surprisingly thoughtful study Time is Money, estimate that fully funding all the transit spending that RTA wants, plus some “smart growth” changes in land use arrangements, would add 22,307 jobs by 2020. They do not discuss how the funds would be obtained, although the study does note that a doubling of gasoline prices– which might be achieved thru taxation– would have great benefits for transit use.

We'll pay $141,000/job you "create"

Or, to look at it differently, we’ll give you $353,000 per acre of land you use.  That’s what the City of Chicago is giving ” ML Realty Partners LLC” to build a “distribution center” at 401 N. Cicero.  Now, all I know about this is what I read in the papers, but according to the Jan 20 Tribune article, $10.6 million in TIF money is going to “create” 75 jobs on 30 acres.  This site is practically adjacent to the Green Line Cicero station.  Why did nobody want to develop it before? (My guess is that it’s because the landowner was holding out for TIF money.)  And how can we justify less than 3 jobs/acre on a transit-served site?  This sort of thing might be suitable for Will County, not the west side of Chicago.  Is there nothing more productive that can be done with this land?

More on transit delays and funding

The good news is that, since October 4, not a single CTA bus has broken down while I was aboard (and yes, I have been riding buses, not every day but often).

The less good news is that this morning a minor fire (or at least smoke) aboard Purple Line Run 503 delayed inbound service 20 minutes during the AM peak.  The problem was aboard a 3200-series car, CTA’s newest.  I don’t know the specific details of the fire, perhaps it was unavoidable, but it doesn’t seem to be due to the age of the equipment.

Vacant Land is still undertaxed

Many years ago, I wrote a memo called “Vacant Land is Undertaxed.” The title says it all, but it’s still true today.

A new Civic Federation report shows vacant land in Chicago assessed at just 4.81% of market value– it’s supposed to be assessed at 22%. On this basis, vacant land in Chicago is worth $5.3 billion, and to assess (and tax) it properly would bring in over $50 million/year. If the County Board were to revise its classification ordinance to assess vacant land at 40% of value (to go any higher would have other repercussions), another $40 million or more would be recovered.

In the suburbs, the underassessment is less severe, but vacant land there is estimated to be worth over $4.6 billion, so some additional revenue could be realized.

And or course, no matter how high the taxes on vacant land are raised, nobody’s going to move it away or decide not to use it because of the tax on it.

A letter to this effect was sent to the Tribune this afternoon. I am sure they will instantly recognize it as a perceptive and cogent statement, and will publish it under a prominent headline. Uh, right?

UPDATE Nov 6: The Tribune did publish the letter,  though not formatted quite as I wished.  Two days later they also included on their web page (but not in print) my suggestion (about halfway down here)  for transit funding from land value.

Compilation of Consumer Taxes

Our friends at the Civic Federation have published a memo on Selected Consumer Taxes in the City of Chicago. Showing a total of 29 different taxes, it shows that the sales tax on general merchandise purchases in Chicago is now 9%:

  • 5% State (of which 0.25% is passed on to RTA)
  • 0.75% RTA
  • 1.00% Cook County
  • 2.25% Chicago

In restaurants we pay an additional 1.25%, of which 1% goes to McCormick Place and the remainder to the City.

Something I didn’t know about is that taxi medallions are reportedly taxed $78/month by the City.   Anyone know when this started?  If raised to  something like $350 or $400/month, it wouldn’t affect the earnings of cabbies, except those who own medallions, and might bring in $25 million for the City.

RTA prefers parking to transit

Whoops! Update from Sick Transit– RTA can tax only fee offstreet parking, and would have to eliminate its sales tax to do so.  Still might not be a bad move…

Earlier post was:

Yes, the RTA has authority to impose and collect a parking tax, per 70 ILCS 3615/4.03 . As one commenter stated at Sick Transit Chicago, RTA chose “a service meltdown over exercising the authority it does have” to tax parking.

I don’t consider a parking tax the best way to fund transit, as its economic objectives could be more efficiently obtained thru a land tax. But it’s better than a sales tax, and it’s already authorized. If RTA’s main purpose were to support and improve public transportation, this would have been done.

How transit can fund itself

It’s simply a matter of retrieving some of the benefits that transit creates.  I have (finally!) put together estimates of land value and transit funding desires, to show how a land value tax for transit might work.   It looks as if a typical homeowner, for $290/year, could get all her transit paid for– not just the subsidy, but the fares, too.  Other options are cheaper.  Details here.

New data on supporting transit thru a land value tax

The previous post notes that the value of taxable land in the Chicago metro area exceeds $1 trillion. Therefore, if we want to get an extra $200 million for transit, we can do it with a land tax rate of 0.02%, meaning $40/year for the owner of a $200,000 lot. Another option is to raise $2 billion/year, use some for transit and some for roads and parking, so that people who don’t ride transit will still see direct benefit. This would cost our typical homeowner $400/year, likely deductible from federal taxable income and partly credited on state income tax. Renters, at least in theory, will pay none of this tax; it will fall on owners of the land on which their rented quarters are located.

A proper analysis of this would compile current transit funding sources and uses, and show how funds will be freed up, and taxpayers unburdened. In addition, it would use information compiled by Richard W. England, from a study by others of Washington, DC, which estimates a drop in job growth of 2.08% for every 1 percentage point increase in the sales tax rate. Applied to the Chicago area, this means that the existing and proposed transit sales tax will reduce, by 9,422, the number of jobs which would otherwise be in the metropolitan area ten years from now. [These figures are calculated in a simple spreadsheet which I would post here, if I could figure out how to post it, and will send to anyone interested.]