IL: As CTA tax district rakes in huge amount of taxpayer money, decision looms over what to do with it

City Hall will soon have a far-reaching decision on its hands: How to dispose of a huge, growing pot of taxpayer money collecting in a North Side special taxing district that has quickly outperformed expectations.

The district has already taken in just under $400 million since 2017. It is on track to pay off a major facelift of four Chicago Transit Authority stations and the century-old infrastructure connecting them way ahead of schedule and estimated to bring in just shy of $100 million annually by 2031.

The billion-dollar question is whether the CTA will keep receiving cash infusions from the district to help pay for future projects once the first phase is paid off, or if the money will instead be recouped by the city and other taxing bodies that are facing their own looming budget catastrophes.

Thanks to the rapid rise of property values within its boundaries, the “Red and Purple Modernization Phase One” tax increment financing district is on pace to pay off the $625 million earmarked for the first phase of overhauls to tracks and stations between Belmont and Bryn Mawr avenues by 2028, leaving 24 more years for its balance to balloon.

What to do with the money that keeps pouring in will likely be up to whomever occupies the fifth floor next term, be it Mayor Brandon Johnson or a successor elected in 2027. Johnson is already in a separate TIF tussle involving Chicago Public Schools and his office did not respond to requests for comment about plans for the burgeoning fund once its CTA commitment is complete.

Johnson has criticized TIF districts for locking away money that would be better used in disinvested communities. His signatureeconomic development bond is funded by allowing certain TIF districts to expire in the coming years. But like his predecessors, Johnson has increasingly skimmed from TIF fund balances to plug budget holes, and he could do the same with the RPM district down the line.

The fiscal prospects for both Chicago and its transit authority are bleak. Such a large pot of money would be difficult for the city to cede by terminating the TIF early. The state authorized TIFs like RPM to benefit transit specifically, making it a natural revenue source for CTA’s future Red Line plans. The City Council rarely votes to let those districts expire early. Doing so would relinquish any built-up funds, divvying up the balance to give back to other taxing districts while allowing them to access that bigger tax base.

To David Merriman, a professor at the University of Illinois Chicago who has studied the TIF issue nationally, “there is not much of a conundrum. Once the TIF has provided $625 million it makes sense to dissolve it,” he told the Tribune in an email.

The current redevelopment agreement authorized under Mayor Rahm Emanuel limits the TIF to allocate no more than that $625 million to RPM. The city would likely need to amend it to spend on additional projects beyond that.

The CTA told the Tribune it is premature to be talking about future funding sources, but has made clear elsewhere there is more costly work to be done. Since 2023, the agency has been developing plans for RPM’s next phase, briefing the public and gathering input on needed fixes to the Red Line between the Addison, Sheridan, Thorndale and Howard stops, along with the entirety of the Purple Line Evanston Branch.

Upgrades, they have said, would add capacity, speed up travel times, improve accessibility and prevent further deterioration of century-old portions of the line. Their final study was expected this year, though the CTA said it does not have a release date.

“It’s possible that we could seek transit TIF funding for future phases, but we have not yet finalized future phases and funding plans. We would also need to work with the Chicago Department of Planning and City Council before we could pursue that,” said Tammy Chase, a CTA spokesperson. “As for sunsetting the TIF, that would not be up to CTA to decide.”

Assembling the next phase requires environmental and engineering reviews, plus the pursuit of federal funds. Former CTA President Dorval Carter, who retired in January amid complaints about his leadership during the pandemic, did win near-universal praise for his ability to tap relationships with transportation officials in Washington, D.C. The CTA is currently operating under interim leadership.

The main federal Core Capacity grant paying for roughly half of RPM Phase 1 “remains a possible source of funding for future phases,” Chase said.

Many of the Red Line improvements the agency is considering either fall within the boundaries of the current RPM TIF or in districts nearby where money could be easily transferred.

If the CTA wants “additional TIF to support additional modernizations they should have to make that case and the City Councilneeds to be convinced,” Merriman said.

A new round of funding would require a new agreement with the city, whose leaders are likely to have their own ideas. Flush TIF districts have increasingly been “surplused” come budget season. A surplus is when dollars not already obligated to a project are swept out of TIF accounts and disbursed to all of the taxing bodies in the city as extra revenue.

“Barring any other plan, if the funds are there to cover what you need,” 40th Ward Ald. Andre Vásquez said. “I see that being TIF surplus central, if anything.”

Though frowned upon by watchdogs as a temporary solution to fiscal problems, Johnson administration officials have made clear TIF sweeps will continue, with little pushback from the council.

In a traditional TIF surplus, Chicago Public Schools get roughly half of that money, the city gets a quarter, and other agencies like the Chicago Park District, Cook County and Water Reclamation Districts each receive a cut. CPS is requesting another massive surplus this year to help prop up its ailing budget.

But transit TIFs differ from traditional ones in a few key ways. For one, CPS is held harmless, essentially guaranteed collection of its full freight of revenue as though the district didn’t exist (meaning a sweep of the RPM’s TIF fund wouldn’t help). The school district has billed about $536 million in the TIF since its first year, based on the county treasurer’s office estimates through 2023.

Other taxing districts, including the city, get a 20% cut of RPM’s revenues.

Typically aldermen can help steer TIF money toward a variety of infrastructure projects in their ward — fixing up roads, lighting, or rehabbing sites for other private developments to occur. But under state law, transit TIF revenues can pay only for the development, expansion or rehabilitation of new or existing transit passenger stations; transit maintenance, storage or service facilities; and rights-of-way for use in providing transit within the district.

The money must be spent within the TIF boundaries, which stretch half a mile east and west of the CTA’s Red and Purple lines between North and Devon avenues. The agency has routinely transferred funds to TIFs next door to pay for station or track work.

Transit TIFs were quickly approved by state legislators and then aldermen in 2016 before the end of President Barack Obama’s last term, and the Red and Purple Line district was the first one created.

The district was designed to help match that federal Core Capacity grant that would pay for roughly half of the $2.1 billion first phase of the project.

Property taxes flowing into the TIF would cover up to $625 million. And $385 million raised by CTA, the $950 million Core Capacity grant and another $125 million in federal congestion mitigation and air quality funds would cover the rest.

The original plans were for the city to apply for a federal transportation program loan and pay it back with money from the TIF. Instead, they’ve paid for it directly, likely saving millions in interest costs.

In 2017, RPM raised about $8.3 million. That figure doubled the next year and the year after that. In 2024, according to the latest annual reports released by the city’s Department of Planning and Development, it raised about $75.6 million, far exceeding initial expectations.

Of the roughly $380 million spent so far, about $350 million went directly to the CTA, according to annual DPD reports from the RPM TIF and the adjacent TIFs nearby. That money helped pay for revamps of four Red Line stations that debuted in July. Construction of the flyover at the intersection of the Red and Purple lines just north of the Belmont station and updates to other viaducts, tracks, train structures and signal systems along the route are also part of Phase 1.

Ald. Maria Hadden’s 49th Ward is just outside RPM’s boundaries, but does have a TIF district surrounding the Loyola station, making it eligible to receive funds from the RPM TIF next door.

“I don’t want to see just another big slush fund. If this is kind of reaching maximum payout to the CTA by 2028 and it’s not expiring until 2052, we should be really planning now,” she said, including for potentially “creative” uses for that money for transit-related projects.

Chicago’s other transit-focused TIF was approved by the City Council in 2022 to help fund the Red Line Extension. That TIF district is expected to generate nearly $960 million to help fund the project, which will extend the Red Line 5.6 miles south to 130th Street. So far, the TIF has generated just $6.8 million in property tax increment, but it does not expire until 2058.

Advocates for the extension — discussed for decades before the CTA finally locked in the federal money needed to pay for it this year — view it as an overdue investment in the Far South Side, where residents of majority-Black neighborhoods are cut off from CTA rail access.

But the ballooning cost of the project — from an initial $3.6 billion up to an estimated $5.7 billion — has attracted criticism, including from supporters of investment in public transit.

The transit TIF’s success stands in stark contract to the agency’s broader fortunes: Along with Metra and Pace, the CTA is facing a fiscal cliff as federal pandemic relief funds run out. Springfield legislators have yet to craft reform bills to help avert service cuts, fare hikes or layoffs for next year.