Responding to PIRG, despite WordPress

Phineas Baxandall, one of the authors of the Illinois PIRG report blogged yesterday, commented on the item. Well, I responded to his comment, but for some reason WordPress swallowed the comment. Twice. I tried to comment as a normal person instead of myself. Swallowed again. Tried again. Rejected as “duplicate.” I don’t know what’s going on at WordPress, possibly there is some difficulty regarding html in the comment. But following is my response to Phineas Baxandall.

I’m always happy to see activists claiming that Henry George would approve of their work, but in this case there’s a serious gap between George’s proposal and yours.

George wanted to remove all taxes from productive activity, and instead charge for control of land (and other natural resources). Retail sales and service are productive activities, and when they’re taxed then the cost of living increases and living standards are reduced. Real estate transfers, too, usually involve productive activity, either construction or at least the transfer of property to someone who can use it more effectively than the seller.

Development impact fees likewise make it more expensive and difficult to provide housing (or other kinds of development). If such fees were truly user fees, then they’d be paid by all users, rather than just by those who seek to build.

You’re certainly not the first person to misunderstand George’s ideas, which is why we have Henry George Schools in Chicago and elsewhere, run courses by Internet, and have Progress & Poverty posted in original and modernized versions. Some relevant (and more succinct) modern documents are here.

It’s not so important whether your proposal would please Henry George. What’s important is that, had you proposed supporting transit thru a tax on location values, you would have recommended a policy to reliably fund transit in the long run, encourage transit-supportive development patterns, and improve the standard of living of ordinary working people.

"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.

Assets we didn't realize we have

So Mayor Daley and the Olympic advocates needed to find some public money to back the Olympic bid, but didn’t want to use “tax money” since a lot of taxpaying folks would get upset.  So they discovered air rights.  They say that air rights over the truck staging area south of McCormick Place can be sold for $100 million.  Presto! Found money for the Olympics.  And, by the way, if Chicago doesn’t get the Olympics, they’ll sell the rights anyway. (Tribune Sun-Times  )  The site belongs to McPier, not the City, but that can be remedied.

This may be “found money,” but I think the issue is “why was it lost?”  What other land is McPier sitting on, not using fully, while taking money from every restaurant meal in the central part of Chicago?  With RTA and the State crying for funds, can’t we put some of this into use now?

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.