Category: Chicagoland

"Protect land speculators" — Illinois PIRG

A solicitor stopped by my house a week or so ago pushing Illinois PIRG’s campaign to “save our transit.” They do have a report, funded by the “Illinois PIRG Education Fund” and prepared by Brian Imus, Nick Christensen, and Phineas Baxandall, that explains how they want us to pay more money for transit service.

The report notes that “Locations served by transit… show increased property values compared
to similar locations not served by transit.” Although they do cite sources for this assertion, they don’t refer to either of the Chicago studies which are (see footnotes 3 and 4 on page three of this). So then do they propose a tax on location value?

No surprises here. They proclaim “Seven Principles for Funding Transit:”

1-Enhance market efficiency

2-Low collection costs

3-Reliability

4-Diverse funding

5-Fare increases are self defeating

6-Budget accountability

7-Community participation

They do provide some discussion of each. Then they evaluate several potential sources of funding:

-Sales taxes

-Gasoline tax

-Rental car tax

-(auto) License, registration or title fees

-Several other driving-related taxes

-Real estate development impact fees

-Stormwater fees

-Real estate transfer tax

-Parking tax

Their recommendation:

-Higher sales tax

-Extend sales tax to services

-Establish a real estate transfer tax, or maybe one of a few other taxes.

But although they acknowledge that transit service increases land value, there is no consideration of this option. Instead, they want to reduce economic efficiency by raisng taxes on economic activity.

Two more nonviable projects?

Today’s Tribune tells of two more TIF subsidies, one to keep an employer in Chicago and another to build hotel and office space.

Navteq will get $5 million that would otherwise go to schools and other public services, to retain 550 jobs (a total of 900 including expected growth) in downtown Chicago.   Navteq CEO Judson Green implied that California would be a more efficient location for the company, but that $5 million persuaded him to remain in Chicago.  btw, he is obligated to donate $50,000 of that to “non-profit organizations.”  So I wonder about two things:

(1) Wouldn’t the  230,000 square feet that Navteq is taking at 100 N. Riverside have been rented to some other employer, if not Navteq?  And if it would’ve remained vacant, wouldn’t that have eased, at least a little, the peak-hour load on the CTA and Metra?

(2) If in fact California is a better location, will Navteq execs and customers end up flying back and forth, adding to O’Hare congestion and greenhouse gas?

Maybe RM Daley answered the question at his press conference to announce the deal.  If he hadn’t used our tax money to persuade Navteq to stay in the City,  “there’d be a big headline, ‘Why does Mayor Daley let those companies move?’ “  And I guess he’s right, at least in some cases.  Apparently there’s no headline, “Why does Mayor Daley waste all this money?”

The other TIF subsidy is $58.8 million, covering about 1/8th  the cost of renovating/expanding the space atop Union Station.

The new Union Station will have an additional 14 stories on top of the existing eight stories. It will house a 300-room hotel, likely to be operated by Hilton Hotels Corp.; 85,000 square feet of retail space; 200 condominiums; and 600,000 square feet of office space.

The office anchor tenant, the American Medical Association, has agreed to lease 275,000 square feet, said a Jones Lang LaSalle spokeswoman.

This project was first proposed over a decade ago.  Maybe it’s not viable on its own, without the subsidy, in which case one wonders why it is needed if no one who will use it is willing to pay for it.  Or perhaps market conditions have improved and it’s viable now, in which case one wonders why the developer should  be given what amounts to about a dozen years worth of taxes on a thousand Chicago bungalows.

Explaining TIF's

Several weeks ago, Ben Joravsky(?)  mentioned that Mike Quigley had done a report on TIF’s, their impacts and misuse.  Having finally read it, I find it’s a good, clear description of how TIF’s work in Chicago and Cook County, and I recommend it for those who want a good understanding of this.  There are also recommendations for improving the reporting, so the public (if it cares, and/or is aided by journalists) could understand what TIF’s are actually doing.

Unfortunately, Quigley believes that TIF’s are a legitimate development tool, just that they’ve been used inappropriately.  Why local governments cannot simply collect the taxes and build the infrastructure, without designating special zones, is not explained.

Henry George's proposal in action

Today’s Tribune gives us another example of the community collecting the rent: Chicago Park District harbors.

For many years, boat slips were greatly underpriced, so in order to get one you had to bribe a Park District employee. In 1996, harbor management was contracted out to Westrec Marina Management. Rates were raised and continue to increase. Harbors were improved and the number of spaces increased from 4400 to 5100.

A slip for your 35-foot boat at the popular northside harbors will cost you $3418 if you’re a Chicago resident, with a 25% surcharge for nonresidents. Fees are expected to yield $20.4 million in 2007, against $7.3 million operating costs. Of course there are also capital expenses, but the balance goes into the Park District’s general fund (although part of the cost is municipal tax which presumably goes to the City).

Of course there are people complaining about the cost: “It saddens me to see these prices get to the point where some people have to reconsider whether they can afford to do it anymore. With the way the economy’s going, fewer people will be able to get into boating in the first place,” says one boater.

You will always get people complaining, on behalf of the poor, that their costs should be reduced. It is obvious that boaters are not poor people. If you don’t want to pay to keep your boat in Chicago, there are less expensive harbors at Waukegan, Winthrop Harbor, Michigan City, and elsewhere. There are cans and star docks (which I guess require one to row out to one’s yacht) for as little as $1200/year.

Henry George’s proposal is really this simple.  The community makes land valuable.  That value belongs to the community, who should collect it in the form of a periodic payment for the exclusive right to use a piece of it.  Even when the land is water.

CTA pension liability isn't the only one

A February Civic Federation report(pdf), which I just encountered, reviews the year-end 2005 status of  ten pension funds serving local gov’t employees in Chicago and Cook County, including CTA.  Total unfunded liabilities: $16,486,000,000.   And of course this doesn’t include any of the inadequately-funded State pension funds, nor suburban funds.

So some solution will have to be found for public pension funds, and I see no reason why transit riders should pay any more than other taxpayers for unwise decisions made by those they elected.

Illinois farmland prices continue to rise

Our friends at the Illinois Society of Professional Farm Managers and Rural Appraisers have issued their 2007 report.  Basically, farmland prices continue to rise into the first quarter of this year.  Although 1031 exchanges are still a factor,  the greater part of the increase seems to be due to increasing yields of crops selling at higher prices (ethanol subsidies being part of the reason).  Coal mining also seems to be a factor, I guess because landowners can expect to sell rights, or the land itself.   And wind turbines, which as I understand it yield far more than field crops.

Prime quality farmland is selling at $5,000 to $6,000 per acre outside of metropolitan areas, and up to $30,000 on the suburban fringe.  “Recreational” (hunting) land goes for less (this being land not terribly good for farming).

The report points out that 55% of American farmland is owned by people who do not farm it, and “that number is growing.” If I were inclined to join them, I would be concerned by the report’s assertion that “Farmland is a growth stock,” with a graph very reminiscent of a stock chart, showing that farmland values fluctuate, but the long-term trend is sharply up.

There’s lots more and the report is well worth a look by those interested in where our food comes from and what it costs to produce.

Georgist tax– another Cook casualty

 What could be more Georgist than a tax on sulfur dioxide emissions?  Well, maybe something else, but at least it would be a move in a Georgist direction.

Such a tax was introduced at the Cook County Board, to raise a little badly-needed revenue while providing incentives to reduce emissions.  It actually passed, with votes from the machine commissioners (Butler, Daley, etc.), as well as Mike Quigley, but opposed by “reformers”  Claypool and Peraica.  It passed, 10-6 but was vetoed Monday by Pres. Stroger.

Mixing poor syntax with bad economics, Stroger wrote:

“I oppose this Ordinance on the grounds that said emissions should not attempt to be controlled through a Cook County tax but rather, said emissions should be regulated by the County, State, and Federal Government in order to fully protect our environment and the health of our citizens. “

Probably there’s more politics here than meets my naive eye.

Thanks to Bill Wendt for the report, DJWInfo for the vote tally, and Mike Pitula of LVEJO for pushing (whether he knows it or not) a good Georgist reform.

Increasing value of taxi medallions

Today’s Tribune asserts that Chicago taxi medallions — a requirement if you want to operate a taxicab in the City– now cost $77,000 each (“Chicago hails two driven cabbies” Tribune, 2/8/07) . That’s up from “over $40,000” in 2004 (“City says cab agent misused $100,000, Tribune, 4/25/04) and $28,000 in 1991 (“Metro Briefings”, Sun-Times, 7/17/91),

Of course, fares were raised 11.7% in 2005 (“Cab riders turned off by rooftop ‘not for hire’ light: Survey finds most favor old off-on signal”, Sun-Times, 12/9/05; “Increased taxi fares quietly take effect,” Tribune, 5/12/05), 16% in 2000 (“FOR TAXI DRIVERS, FARE HIKE IS NOT WITHOUT A PRICE,”Tribune 12/1/00), about 15% in 1997 (“Taxi fares get a boost”, Sun-Times, 1/14/97), and about 9% in 1994 (“City Cab Fares Go Up Today, Sun-Times, 1/18/94).

Let’s do a little math here. Looks like since 1991, fares are up 48%, and the price of a medallion is up 175%. So medallion owners seem to be taking an increased share of revenue produced by the cabbies. For reference, the Bureau of Labor Statistics says consumer prices rose 48% between 1991 and 2006.

Meanwhile, in New York, medallions are going for over half a million dollars and there has been an effort to set up a working medallion exchange, where medallions can be traded on margin.

Misdirection of Development Incentives

This is not really news, but it does seem to be an additional example. Washington-based “Good Jobs First” has released a Ford-funded study showing that subsidies for “job creation” tend to go to communities that have low unemployment. Of course, dummy! It’s easier to create jobs there.

Now the only reason I found this was that I was looking for the study released yesterday by “Broadway in Chicago,” asserting that their operations have an “annual economic impact” of $635 million in Illinois. I haven’t seen the details of how this is measured, but most likely it assumes that, if there were no BIC operation, then the theatres would remain dark, nothing else would be built in their place, and nobody who came to Chicago and saw one of their productions would have found any other reason to come. Furthermore, none of the people who serve these visitors, or the theaters, would have found any other work. Crains says that “Mayor Daley’s administration has invested about $60 million into the downtown theater district,” but doesn’t indicate how much went to BIC and what other subsidies they may have received. The Tribune assigned a theater critic, not a business or economic reporter, to the story.