Thursday, July 26, 2007

Suburbanites & The New Math

It seems like it was only yesterday that the public officials of Kane County were piling on Steve Schlickman and Leanne Redding, two architects of the RTA's Moving Beyond Congestion plan, complaining that the RTA was unfairly squeezing the collar counties for cash to bail out the CTA. Yet, it was literally just yesterday that Kane County official were praising an RTA proposal to amend SB 572 to change the funding splits between the three service boards and the RTA.

As you might recall, SB 572 provides for a one-quarter of one percent increase in the RTA sales tax rate throughout the six-county region. This will increase the sales tax rate to 0.5% in the collar counties and 1.25% in Cook County. (In addition, the collar counties will be able to impose another 0.25% sales tax that they can use at their discretion for road and transit projects.) This tax increase should raise roughly $300 million in new money for transit.

SB 572 also provides for a real estate transfer tax in the City of Chicago only. It is unclear how much revenue this tax would raise. Representative Julie Hamos estimates the revenue at $42 million while the Illinois Department of Revenue pegs the new revenue from the transfer tax at almost $100 million.

Under SB 572 all of this new money regardless of source is to flow to the service boards through the current sales tax allocation formula in the RTA Act and from the RTA through its allocation of discretionary operating funds. At the end of the day, the CTA was to get 60% of the new money, Metra 30% of that money and Pace 10%. This allocation is consistent with historical levels.

What has changed? The Daily Herald reports that "the RTA cut the amount of cash going to the CTA, raised the amount going to Metra and Pace and required Chicago taxpayers to pony up much more in the form of a real estate transfer tax." The new "compromise" will see the CTA getting 48 percent, Metra 39 percent and Pace the remaining 13 percent.

It is appears, however, that this "compromise" may be less than meets the eye. The key question is whether the new 48%/39%/13% allocation formula applies to the revenue from the Chicago-only real estate transfer tax if it is enacted. Certainly, if the CTA agreed to such a huge haircut in its share of all of the new operating funds, a reduction of 20%, then the CTA is either stupid or desperate or both.

I suspect the CTA is neither. It is more likely that the revised allocation formula applies only to the revenue from the 0.25% increase in the RTA sales tax across the region. The only change is that the Chicago Mayor and city council, rather than the General Assembly, will have to step up and impose the real estate transfer tax. If Chicago does so, all of that new revenue will go to the CTA and in the end the CTA's share of new money will be about 60 percent.

The new "compromise," in other words, likely is nothing more than a numerical sleight of hand that will have no bottom line impact on the service board shares of new money. If the Mayor of Chicago is willing to push through the real estate transfer tax then City representatives can still support the so-called reform package because they know that in the end the City will get approximately 60% of the new revenue. The compromise will, however, allow suburban public officials to thump their chests and say they have beaten back the rapacious hands of the CTA. Providing the suburban officials with that political cover may be the only point of this "compromise."

There is also talk about increasing the size of the RTA Board from 12 to 15 members. The reconstituted board would look as follows:

City of Chicago--5 members selected by Mayor (CTA Board Chair off the RTA Board)
Cook County--5 members--4 selected by the suburban members of the Cook County Board and one member selected by the President of the Cook County Board
Collar Counties--5 members--one from each collar county

The Daily Herald article, however, indicates that reconstituting the RTA Board in this fashion is far from a done deal.

Surely some reader has accurate information about whether the proposed new allocation formula applies to all new operating revenue, including the proceeds of a Chicago real estate transfer tax, or just to the 0.25% increase in the RTA sales tax rate. Pray tell if you do. If it turns out that the CTA has agreed to a measly 48% share of all new operating dollars then we truly have some new math.


Anonymous said...

Moderator said, "The new 'compromise,' in other words, likely is nothing more than a numerical sleight of hand that will have no bottom line impact on the service board shares of new money."

That is true in year 0 right? But down the road, it seems to reason that the sales tax base is more likely to grow stronger (albeit not that strong) and at at least more steadily than a real estate transfer tax. Isn't it possible that CTA is negotiating a bail-out for the next few years, but forcing another crisis in, say, 2-3 years?

In the meantime, the RTA stays the same, in fact, it gets more dollars to waste on endless studies and plans, Metra stays status quo, Pace is perpetually on the fence (and what about paratransit in all this?)

oh well

Unknown said...

One glimmer of hope: it sets precedent for further transit dedicated taxation within Chicago. The mayor's budgets have implemented all manner of random little tax increases (remember the "litter tax"?) with zero political fallout.

Anonymous said...

It is more of a "Bossa Nova" then a "New Math" because the deal seems Slightly Out of Tune with the Auditor General's Report. No?

Anonymous said...

Of course, there is nothing about this posted on nor on the SB572 site. Thus, whatever is happening is not transparent. Also, I don't buy the Daily Herald's assertion that it already passed the Senate, as what passed there had to do with restricted drivers licenses. Apparently the House stripped the bill by proposing Amendment 1, and the Senate would still have to concur with any amendment.

All I can see from the legislative history is that the rep. from my district is now frequently mentioned.

Anonymous said...

I conur with PC on that hope, although, it’s still just a glimmer. The City, as of yet, has not shown a willingness to truly create a dedicated transit revenue structure, at least not with the obvious ways that relate to the costs of auto traffic: parking-space taxes, meter increases and public parking surcharges. And to dive further into this: the City really never really seems to take the CTA’s side when buses are being discussed. When there’s construction, it’s always CTA first who’s asked to detour, move bus stops, squeeze into one lane, etc.. Traffic Control Aides always, in my mind, approach a CTA bus as just another vehicle when choosing who gets through an intersection first, even if there’s 40-50 people on that bus, versus 1 person in each car. Bus-only lanes are rare downtown and the City has yet to try out bus-only traffic signaling. Private buses, feeding the Metra stations, double-park and berth however they please, and so do the cabs.

When’s the last time you heard of a large City revenue plan (TIFs, McPier, privatization) that involved transit? As mentioned on another post, the City uses Federal dollars to provide free trolley service for tourists downtown, yet by being a separate operation from the RTA, it denies further Federal dollars to come in for the transit agencies. I hope that as Mayor Daley travels the world and sees how creative transit planning (and funding) can be done, he’ll start bringing that thinking back home. I think the Olympic “Green” Mayor needs to realize that a “World Class” city needs a transit system that is clean, efficient and effective, because that’s what the world expects.

Anonymous said...

Also, I would wonder why the "street furniture" revenue is not being used for the CTA. There isn't much point to bus shelters if there is no bus.

As I said before, I'm not sure what was the impetus to having the city impose the real estate transfer tax instead of the RTA, but, with that said, the city should take more financial responsibility for the CTA if it wants to retain political control over it, instead of giving suburban Cook County taxpayers the business that because whatever percentage of the unlinked trips start there, they owe the CTA something, without an effective voice in its governance.

Finally, to the first comment, while there may be a real estate slump at the moment, the real estate transfer tax should start paying big dividends once the deeds are issued for Trump Tower, the Spire, and the huge number of downtown developments. Now, if they could only get development going on the south side (where all those We Buy Ugly Houses billboards are located) you would collect more sales and real estate transfer taxes almost entirely dedicated to the CTA.

Anonymous said...

he City of Chicago is the greediest among the greedy (northwest suburbs are 2nd) when it comes to Value Capture from transit investment-- but they all do it. It has been a great game-- tax the public and charge the riders-- real estate interests accrue the benefits that are in turn taxed by the locals who don't have to share it back with transit-- all the while using it as an emblem for sub-regional politics and as a very convenient scape goat for their highway failures.

That is why the whole political game is really about new rail lines-- even though bus does all the heavy lifting. To the politicos, transit is a plantation.

Through this whole transit funding and governance debate, the body politic has been forced into some small measure of transparency and hopefully, through this very minor concession to value capture, a breach in the system that was designed to not to keep transit "in service" but rather, "in-servitude".

But they'll quickly write-off the minor loss if they can just get a nice Bond Program damn-it.

Anonymous said...

100% of the real estate transfer tax, if levied, would flow to the CTA, per Julie Hamos. So you're right, the change is more about optics than substance.

Anonymous said...

This obscured little deal as currently proposed is full of cute little loopdy-doos-- what Harold Washington used to call Hocus Pocus Dominocus. And suburban Cook "Gets Fooled Again".