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June 9, 2011
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CTA Red Line South Extension

NOTE: This is the third in a three-part Policy Updates series on GO TO 2040 Major Capital Projects:

Keeping Tabs on the Major Capital Projects in GO TO 2040

Major Capital Project Series -- Central Lake County Corridor

CTA Red Line South Extension

When regional plans like GO TO 2040 are produced, one relatively small component typically attracts the most attention -- the identification of new major transportation projects. For projects to receive federal transportation funds or obtain federal approvals, they must be included in these plans. As the name implies, "major capital projects" add capacity, come with large price tags, and often promise to generate economic returns, reduce congestion, improve mobility, and, sometimes, even transform large parts of our region. GO TO 2040 includes five new major projects or extensions, all of which have been moving forward in terms of their own individual planning processes.

Over the next several weeks, CMAP's Policy Updates blog will provide updates on how these projects are developing. The first piece examined the Elgin O'Hare Expressway and West O'Hare Bypass Improvements and the second piece looked at the Central Lake County Corridor (CLCC) project. This piece will focus on CTA Red Line South Extension.

The South Extension project extends the Red Line, which is currently 22 miles long and is the Chicago Transit Authority's (CTA) most heavily-used rail line, for an additional 5.5 miles. It would travel from its current terminus along I-57, following the Union Pacific (UP) corridor to 130th St., operating on an elevated structure for its entire length. Intermediate stations are planned at 103rd, 111th, and 115th.

The project is included in GO TO 2040's short list of major projects primarily because it offers three substantial benefits:

1. Increased accessibility to jobs.

2. The streamlining of multiple CTA and Pace bus-to-rail connections for routes south of 95th street.

3. The catalytic impact the project could have in generating economic development in a highly distressed area of the south side of Chicago.

Chicago Mayor Rahm Emanuel's transition report echoes GO TO 2040's emphasis on this major expansion. Referring to the Red Line as the "backbone of Chicago's rail system," the report sets out a vision to extend the line to 130th St., and also to rehabilitate and modernize large portions of the existing line, which accounts for over 40 percent of all CTA rail trips.

Currently, the CTA is pursuing simultaneous efforts on both the north and south ends of the line. The Red and Purple Modernization project proposes a series of improvements to track structures, stations, and structures from Belmont north to Linden. The CTA recently prepared a project scope and held a series of public meetings in neighborhoods adjacent to the line. The next step for both the Red Line north modernization and the South Extension is to prepare draft Environmental Impact Statements (EIS) and begin preliminary engineering. CMAP's Unified Work Program Committee, which allocates federal metropolitan planning funds to projects that further the goals of GO TO 2040, recently awarded over $1 million for these efforts.

Adjacent Development Potential and Financing

The South Extension strongly supports GO TO 2040's recommendations for infill development — overall, the plan calls for redevelopment of 20,000 underutilized acres by 2015, and 100,000 acres by 2040. Near several proposed new Red Line stations, a number of vacant and underutilized lots have been identified as having redevelopment potential. Community members have also been actively engaged; a recent visioning campaign — led by Developing Communities Project (DCP) with technical assistance provided by CMAP, the Metropolitan Planning Council, and the Center for Neighborhood Technology — held workshops in adjacent communities to collect input on preferred future land uses around the proposed stations. Through the Local Technical Assistance program, CMAP will continue working with DCP and the CTA to demonstrate the positive impact on quality of life that the Red Line extension will have in affected communities.

Major projects like the Red Line South Extension can do a great deal to catalyze new nearby development, a dynamic that would likely not occur but for the creation of such infrastructure. Furthermore, transit has been shown to increase the value of existing adjacent properties, whose residents and businesses benefit from new or improved access. Given an erosion in federal and state revenues for transportation, as well as the steep cost of building the South Extension (projected to be just over $1 billion in 2009 dollars), it makes sense to assess creative financing mechanisms that can harness these future benefits and help pay for construction.

"Value capture" financing refers to an array of different methods to do just this. Value capture is the practice of implementing a tax or fee on private property near a public improvement to take back or "capture" some of the monetary benefit that the property owners gain as a result of the public investment. The revenue from these fees or taxes is then used to pay for part, or all, of the cost of the improvement. In the U.S. and elsewhere, various forms of value capture have been used to pay for new infrastructure.

Both GO TO 2040 and Mayor Emanuel's transition report recommend the identification of strategies like value capture and public-private partnerships as potential ways to help finance large new projects like the Red Line South Extension. How viable might value capture be as a financing tool? CMAP has been leading some initial research efforts toward evaluating this question, both broadly and for specific projects. Last December, CMAP published an initial report on the array of value capture mechanisms, their mechanics, and policy implications. CMAP is currently conducting a second phase of this work (to be finalized in July), which will drill down deeper to assess the potential of implementing value capture strategies specifically on the South Extension and other major projects.

Two of the more promising value capture strategies — tax increment financing (TIF) and special service areas (SSAs) — are well utilized in Illinois and elsewhere. When targeted effectively, these tools can provide a robust funding stream of local property tax revenues to service the debt on much larger infrastructure bonds, which can provide the necessary funds for large projects.

One of the first observations with the Red Line South Extension is that much of the surrounding area is already within or close to existing TIF or SSA districts (see map below). In fact, the area is already home to three TIF districts and four SSA districts, all of which aim to bolster economic development in a highly disadvantaged area of the City. One initial clue toward assessing the future potential of value capture in this corridor is the amount of revenues already being generated and expended in these districts, as well as tax delinquency rates, all of which offer some indication as to the relative health of these districts.

To permit an analysis of value capture potential, existing property assessments must be collected, and then assumptions must be made on potential future growth in these values. Constraints on the use of value capture, which must be incorporated into the analysis, include the existence of tax-exempt properties (including schools, churches, and public housing). Also, while CTA is the project implementer, value capture tools would provide revenues to other municipalities serviced by the planned South Extension. Thus, additional creativity must be brought to bear in terms of how such revenues might be shared among different entities.

Stay tuned for the initial results of this CMAP work on the Red Line South Extension. As implementation of GO TO 2040 moves forward, this study is only one of the first steps in assessing a number of different potential options for financing a project of such high regional significance.


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