The Chicago Transit Authority's plan to establish a special transit tax-increment financing district to raise $1 billion needed to compete for federal grants to build a $3.6 billion rail transit extension could win final approval Wednesday.
The City Council's Finance Committee advanced the measure to establish what would be the city's
The legislative package also includes an intergovernmental agreement that would give the CTA access to up to $959 million of tax revenue raised in the district.
Approval came after several critics — who support the extension but oppose reliance on the TIF for the local share of funding — voiced worries about the long-term impact on city finances, the lack of state funding, and whether other projects would be left in the lurch due to the diverted tax revenues.
Mayor Lori Lightfoot's intentions to use a transit TIF for the project first surfaced over the summer to aid the CTA in qualifying for federal matching funds and additional grant allocations available in the Infrastructure Investment and Jobs Act President Biden signed last year.
"There's a process you have to go through to get federal funds," CTA President Dorval Carter Jr. told the committee. "The federal government does not commit their money until the non-federal entities commit theirs. It might not be fair. It might not be the way we like it but it's the rules of the game. If I have this commitment for the funding from the city. I can put this project in the position to get this federal money."
The CTA plans to leverage the city's commitment to apply for $2.2 billion in Federal Transit Administration New Starts funding and will seek additional grants available under other federal allocations such as the Congestion Mitigation and Air Quality Improvement Program, and Transportation Infrastructure Finance and Innovation Act loans.
Remaining holes in the financing could be covered by CTA borrowing. Moody's Investors Service upgraded the CTA's $2.1 billion of senior lien sales tax bonds to A1 with a stable outlook from A2 earlier this year. S&P Global Ratings rates the CTA sales tax second lien A-plus and the senior lien AA, both with stable outlooks. Kroll Bond Rating Agency rates the CTA's senior lien sales tax AA and the second lien AA-minus and stable.
Carter also pledged to pursue other avenues such as state funding and said he would also contact Cook County leaders when pressed by committee members to work towards reducing the amount needed from the TIF.
The project has been discussed for decades. Finding a funding source has remained a notable obstacle.
The extension would include four new stations, a storage yard and maintenance facility. It's billed as the largest capital investment ever in the city's South Side, one that would improve access to jobs and schools while reducing commute times. It's also promoted as a project with equity at the forefront given the low incomes of many residents near the line's extension. The CTA aims to begin construction in 2025.
State legislation adopted in 2016 paves the way for the city to establish the special transit district for the 5.6 mile extension of the Red Line beyond its current terminus at 95th Street.
The 2016 legislation was sought by then Mayor Rahm Emanuel as a means to raise the matching funds to qualify for more than $1 billion in local matching funds for the
The city has long used TIFs to promote development in downtown and in neighborhoods. The structure sends incremental growth in property tax revenue in a designated area toward project-related expenses.
Critics say TIFs have been abused to benefit developers in areas like the downtown that are not truly "blighted" and criticize them for taking revenue away from schools and general government needs.
Transit TIF differs on several fronts.
The district can remain in place for up to 35 years compared to 23 years for traditional TIF districts; boundaries are set in part by the level of funding needed and therefore can cover areas that don't directly benefit; and the state legislation doesn't require that the designated area meet "blighted" criteria.
Transit TIF responds to criticisms of traditional TIF in that all tax revenue growth is not diverted.
Schools continue to receive their full share which amounts to about 50%. Of the remaining revenues, 20% is distributed to the city and other taxing bodies and 80% is funneled to the projects.
But the proposed TIF is a difficult swallow for some for other reasons because it relies on diverting tax revenues from an area far north of the actual extension. The boundary for the new transit TIF will include parcels located within an area half mile to the east and west of the current and future Red Line beginning at Madison Street downtown, excluding areas within existing TIF districts.
The new transit TIF has widespread support from infrastructure groups and transit advocates and while the ordinance faced some pushback, critics began their commentary Monday by touting their support for the extension before attacking the funding mechanism.
Alderperson Pat Dowell, who chairs the budget committee, questioned the cost to the city's corporate fund and reliance on a TIF area that would not directly benefit from the extension and in need of its own investments. "Everybody should share in the pain for this project, not just five" of the city's 50 wards, said Dowell, who was the only "no" vote. "It's a citywide issue that needs to be funded by the entire city."
Alderperson Anthony Beale, a frequent critic of Lightfoot, called the funding process flawed, worried over whether the city would be able to capture all the federal dollars it's seeking, and pressed Carter to pursue other avenues including the state to reduce the need for $959 million from city taxpayers. "We don't have anything concrete," Beale said.
Carter said the intergovernmental agreement with the city allows for a reduced funding level if other sources can be found and he stressed the need to get the commitment in place to improve the CTA's competitive edge when it applies for funds early next year.
State funding is a "crap shoot…what I'm really focused on right now is making sure I have a commitment that allows me to move the federal process forward," Carter said, noting that any delays in seeking the funding could hurt the CTA's chances and bump up against the next presidential election and potential change to leadership that could be less friendly to transit.
The Regional Transportation Authority's proposed $5.7 billion five-year capital program includes $340 million for planning the extension. The capital plan relies on federal funding, RTA and CTA borrowing, cash on hand, and state funds. After debt service, about $4.7 billion is available to spend, including about $1.3 billion in 2023.
The transit agency will also be looking to the state for help on operational funding in the coming years.
The RTA which provides fiscal oversight of the CTA, Metra commuter rail, and Pace suburban bus service warns in its proposed
Transit officials along with Chicago Metropolitan Agency for Planning evaluated 27 revenue options and identified 11 potential long-term fixes including increasing existing RTA sales tax levied on Cook County and neighboring counties, an increase in the state motor fuel tax, implementation of congestion pricing, and expanding the RTA sales tax to services that are now exempt.
Other ideas include implantation of a vehicle miles traveled tax on the number of miles driven in a vehicle to replace 5% of state motor fuel taxes lost by fuel efficiency, expanding the real estate transfer tax now imposed on city transactions to include the suburbs serviced by the RTA, raising vehicle registration fees, and increasing Illinois State Toll Highway Authority tolls to benefit transit.
