Monday, June 4, 2007

Amendment #2: Where's Money Coming From?

According to descriptions by the RTA (here) and Representative Hamos (here) Amendment #2 to S.B. 572 could deliver as much as $453 million in new money for transit in the RTA region. In addition, Amendment #2 contemplates a 0.25% surcharge in the collar counties that would generate an additional $121 million. The collar counties could "flex" this surcharge money between highway and transit projects, which means the maximum potential amount of new money for transit from Amendment #2 is $574 million.

Who pays?

The RTA and Hamos pieces do not fully break out which source pays what towards the $574 million in new money. Here's a rough estimate using the 2005 sales tax shares for Cook County and the City to discern their contributions of new tax dollars. (RTA 2007 Budget Book at pg. 144 of 146.) We know from the background materials that a 0.25% tax increase in the collar counties will raise $121 million.

City of Chicago -- $100 million (sale tax increase plus real estate transfer tax)
Suburban Cook County -- $100 million (sales tax increase)
Collar Counties -- $121 million (transit only sales tax)
State -- $131 million-$81 million (PTF match of sales tax/real estate transfer tax) plus $50 million (PTF match increase from 25% to 30%)

Here's how the new transit money sources look on a percentage basis:

New Money Shares (w/out Collar County flex)
Chicago -- 22.1%
Suburban Cook -- 22.1%
Collar Counties -- 26.8%
State -- 29%

If the additional collar county 0.25% tax increase for $121 million of highway/transit flex money is included, the percentage shares of the new money sources are roughly as follows:

New Money Shares (with Collar County flex)
Chicago -- 17.5%
Suburban Cook -- 17.5%
Collar Counties -- 42.2%
State -- 22.9%

Compare these new money percentages with the current tax contributions for operating funding from the various sources. These are rough numbers (note: no fare revenue included):

Current Operating Funding Tax Contributions
Chicago -- $220 million (22.2%)
Suburban Cook -- $384 million (38.8%)
Collar Counties -- $116 million (11.7%)
State--$271 million (27.3%)

Source: RTA 2007 Budget Book (pg. 21 of 146) (using 2005 sale tax percentage splits).

If we add the new money to the existing contributions we get something like this (without including the collar county highway/transit flex money):

Operating Funding Tax Contributions Post Amendment #2 (w/out Collar County Flex)
Chicago -- $320 million (22.2%)
Suburban Cook -- $484 million (33.5%)
Collar Counties -- $237 million (16.4%)
State -- $402 million (27.9%)

Note that the Chicago and State shares post-Amendment #2 (and not considering the Collar County flex) are similar to their current shares. In contrast, the suburban Cook County share declines significantly and the collar counties share rises significantly.

When the collar county highway/transit flex tax money is included in the analysis the numbers are as follows:

Operating Funding Tax Contributions Post Amendment #2 (with Collar County Flex)
Chicago -- $320 million (20.5%)
Suburban Cook -- $484 million (30.9%)
Collar Counties -- $358 million (22.9%)
State--$402 million (25.7%)

Recall that the Auditor General in his Report (pgs. 327-330 of 450) and the Mass Transit Committee in its preliminary 2005 report (unfortunately now pulled from Rep. Hamos' website--email me if you want a copy) concluded that suburban Cook County was subsidizing service in Chicago and, to a lesser extent, the collar counties. The funding formula in Amendment #2 seems to redress this subsidization with respect to the collar counties but not with respect to Chicago.

I stress that these are rough numbers. Hopefully, they give some indication of the sources of the new transit funding if Amendment #2 ever becomes law. That's a big "if" even with the positive vote in the Mass Transit Committee.


Anonymous said...

OK that's it then--now they'll get people out of their cars. Right?

Anonymous said...

Love your analysis on the RTA reform legislation!

Rep. Julie Hamos said...

Thanks for this analysis. It's useful to note that the reason I added a Chicago real estate transfer tax was to balance the revenues among the three subregions. A 1/4% sales tax would generate only $60 million in Chicago, with $100 million or more generated in the Cook County suburbs and in the collar counties. The real estate transfer in Chicago adds an additional $42 million.

While the real estate transfer tax is not popular in the real estate industry, there is a direct connection between development and transit. Homeowners and businesses move to Chicago for our excellent regional transit system. If it is allowed to deteriorate - through service cuts, fare increases or maintenance deferrals - property values and the quality of life in Chicago will be impacted.

That's our thinking behind the two taxes that would be collected for transit in Chicago.

metal medusa said...

The real estate transfer tax numbers are incorrect. The ILGA website shows $99.7 million generated from the real estate transfer tax, not $42 million as indicated in the comment section.

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