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.]

Chicago area land value exceeds $1 trillion

Finally received Lincoln Institute’s new book Land Policies and Their Outcomes. David Barker (apparently of the University of Chicago) estimated land values for four metro areas by looking at vacant land sales. Assuming that each such sale represents the per-acre value of land in its immediate area, he finds that for the Chicago 8-county MSA total land value is $2.188 trillion. From this he deducts streets and concludes that the rest of the land is worth $1.872 trillion. Of course, not all of this could be subject to a land value tax, for instance public facilities and favored nonprofits are exempt. Still, it seems that the taxable value would exceed $1 trillion. And this doesn’t count all the other privileges which could be taxed without reducing productivity.

The paper does include a much lower estimate reached by an alternative method, but that method assumes land to be worth only the difference between the parcel price and the depreciated cost of building whatever is on it. And excludes vacant land. And has some other limitations.

What's missing from the Burnham Plan centennial

Folks around Chicago are getting ready to observe the centennial of Dan Burnham’s 1909 “Plan of Chicago.” We’ve all heard about it, but who has actually read it?

Not me, so I figured I would borrow a copy from the Chicago Public Library.  Not the 1909 original, of course, but there were reprints in 1970 and 1993.   But although CPL has several copies, apparently none of them circulate.  No problem, this is a 1909 document, so it should be free of copyright.  But as far as I can tell, nobody has placed it on-line.  Sounds like a good project for the Plan of Chicago Centennial Initiative

I did spend a little time reviewing a noncirculating copy.  There’s all kinds of wonderful stuff, but I focused on the final chapter.  “Legal Aspects of the Plan of Chicago,” by Walter L. Fisher, is where issues of financing are discussed.   Except for the railroad terminals, there was no indication of funding by anything other than the real estate tax, applied equally to land and improvements.  Fisher did note that, in some places, public authorities could acquire more land than needed for the improvement, and sell the surplus to help capture some of the benefit, but this wouldn’t be feasible in Chicago.

Thanks to Robert Piper for alerting me to this project.