Policy Updates

Transportation Funding Bill Introduced in General Assembly

2013-06-17T17:46:58Z

On May 30, 2013, legislation was introduced in the Illinois House (HB 3637) and the Senate (SB 2589) to reform transportation funding in Illinois. Sharing many characteristics to the proposal advanced by the Transportation for Illinois Coalition (TFIC) earlier in the month, the legislation would eliminate the state’s motor fuel tax and replace it with a new tax based on the wholesale price of fuel. In addition to this new 9.5-percent wholesale tax, the bills would increase a number of registration and licensing fees, terminate the gasohol tax incentive earlier than currently planned, and would reform the distribution of transportation revenues. CMAP estimates that the legislation would result in a net increase of $689 million dollars in the first year of implementation compared to current revenue sources.

Revenue Sources

Beginning January 1, 2014, the legislation would eliminate the current 19 cent-per-gallon motor fuel tax and replace it with a 9.5-percent tax on the average wholesale price of motor fuel. The Illinois Department of Revenue would be charged with calculating an average wholesale price on a quarterly basis. The bills would impose a $15 surcharge to motor vehicle registrations for passenger cars beginning in Registration Year 2014 and for some trucks beginning in Registration Year 2015, and would also increase registration fees for electric vehicles from the current $35 every two years to $222 every year. The bills would increase Certificate of Title fees by $10 and driver’s license fees by $10. Finally, they would end the gasohol tax incentive, which exempts a portion of gasohol fuel sales from the state sales tax, on December 31, 2013 rather than the current December 31, 2018, and dedicate the proceeds from 1 percentage point of the state sales tax on gasohol sales to a new transportation fund.

The following table summarizes the revenue sources provided for in the legislation, along with CMAP’s estimate of the revenues they would yield in the first year after implementation. Note that this estimate is of net revenues, i.e., the total revenues to be raised from the various sources less the current revenues raised from the same or comparable source. It is important to note that the motor fuel wholesale tax revenues are very price sensitive – as motor fuel prices increase, the net revenue yield would also increase. In the table below we estimate revenues based on most recent data, but recognize that gas prices have generally risen since then.

Click for larger image.

Distribution of Revenues

The legislation also modifies the distribution of transportation revenues in the state. The bills essentially follow a two-step process. The distribution of revenues in the first step more or less mirrors current practice, allowing for distributions of the wholesale tax revenues to the existing Road Fund and State Construction Account Fund, as well as allowing for revenue sharing with local governments. The distributions in this first step use existing percentages to allocate revenues across funds as well as the same distribution criteria to share state revenues with local governments. As shown in the flow chart below, these percentages and criteria are applied to a fixed amount of money.

In contrast, the second step provides for a new system. The legislation would create a new Transportation Reform Fund to receive the remaining wholesale tax revenues, new registration and licensing fees, and new gasohol sales tax revenues and distribute them to highway, aviation, transit, and rail purposes. Note that HB 3637 and SB 2589 do not change the distribution of existing registration and licensing fees, which will continue to accrue to the Road Fund, State Construction Account Fund, and Capital Projects Fund as they currently do. The highway and aviation funds would flow to the State Construction Account Fund and to local governments (according to the same local revenue sharing formulas and criteria). The transit and rail funds would flow to a new Regional Transportation Authority Capital Improvement Fund and a new Downstate Transportation Capital Improvement Fund, both to be dedicated to deferred maintenance projects.

Illinois currently allocates highway funds through a non-statutory formula called the "55/45 split," which is not addressed in this legislation.. Anywhere in the following image that the icon appears, funds are allocated based on the formula, which directs only 45 percent of highway funds to the Chicago area, despite the region’s much higher percentage of the state’s population (65 percent) and economy (70 percent). The 55/45 split would continue to apply to all capital expenditures from the Road Fund and State Construction Account Fund, including those in the both the first and second funding “steps” provided for in HB 3637 and SB 2589.

Click for larger image.

Discussion

GO TO 2040 recognizes the need for sustainable transportation revenues and has recommended increasing the state motor fuel tax by eight cents per gallon and indexing the MFT to an inflationary measure. In a previous Policy Update, CMAP outlined its general concerns with a motor fuels sales tax -- chiefly its volatility and potential equity impacts -- in comparison to the traditional motor fuel tax.

CMAP has several questions on the language of the two bills as introduced. First, the language defining the distribution of revenues from the new Transportation Reform Fund is unclear. The 20-percent share to rail and transit projects is entirely allocated to transit agencies, which must use the funds on deferred maintenance projects; unless those deferred maintenance projects coincide with broader rail improvements, it is difficult to see how these revenues could be used for rail purposes. It is also not clear why only the new transit capital funding -- and not the new highway or aviation funding -- must be devoted to deferred maintenance projects.

CMAP is encouraged that serious discussions are underway about the need to invest in our transportation infrastructure, and that these discussions include a dedicated source of capital funding for transit. However, these bills do not go far enough in thinking more creatively about the future of our state’s transportation program. In addition to the questions raised in the previous paragraph, CMAP has adopted principles calling for any new capital program to promote performance-based funding, an open, transparent approach to project selection that evaluates projects based on clear, explicit criteria and may incorporate the input of various transportation stakeholders. Relatedly, the bills also fail to address the longstanding “55/45 split,” the informal policy that directs 45 percent of the state’s highway funds to northeastern Illinois and the remaining 55 percent downstate, regardless of performance or need. The 55/45 split is not a law but rather an agreement established decades ago within the General Assembly.

HB 3637 and SB 2589 present an opportunity for our state to rethink the way it allocates transportation funds. While the bills include several of the CMAP’s adopted principles for a new state capital program, there is still more that could be done. CMAP will continue to monitor this legislation as discussions continue over the summer and when the General Assembly reconvenes later in the year.

Recent Federal Grant Opportunities to Support Manufacturing

2013-06-06T16:26:53Z

In recent months, a number of federal agencies have provided new grant opportunities for funding innovative manufacturing strategies and partnerships. The importance of manufacturing to metropolitan Chicago’s economy was described in CMAP’s manufacturing cluster drill-down report, and the region should be well-positioned to compete for these kinds of investments. This Policy Update describes several of the recent opportunities and two local applications.

Make it in America Challenge

The Make it in America Challenge is a $40 million grant program funded by the U.S. Department of Commerce’s Economic Development Administration (EDA) and National Institute of Standards and Technology Manufacturing Extension Partnership (NIST-MEP), as well as the U.S. Department of Labor’s Employment and Training Administration (ETA). The competitive grant program is geared towards strategies that encourage foreign and domestic businesses to build and/or expand their operations in the U.S. As many as 15 awards of $4 million or less will be granted for up to three-years periods. The application deadline (May 31, 2013) has passed. Applicants were required to propose one integrated project but include three separate scopes of work tailored to the specific uses of each funding source, as follows:

EDA funds must leverage existing assets to attract and expand foreign and domestic firms, increase productivity, and create jobs.
NIST-MEP funds should connect regional supply chains and assist small- and medium-sized manufacturing enterprises (SMEs).
ETA funds are for training and education that prepare a workforce for high-growth industries or occupations.

Regional Response
A regional partnership between the Cook County Bureau of Economic Development, the Illinois Manufacturing Excellence Center, the South Suburban Mayors and Managers Association, the Center for Neighborhood Technology, OAI, Inc., the Calumet Area Industrial Council, and the Chicago Cook Workforce Partnership has submitted an application for this grant. Known as the Cook Calumet Rail Manufacturing and Logistics Cluster (CCRMLC), the partners seek to reverse the negative economic conditions of the Calumet area by leveraging some of the region’s strongest assets, including the fabricated metal and industrial machinery clusters led by innovative rail equipment manufacturers. This area also has extensive rail infrastructure adjacent to vacant industrial land on which rail manufacturers and their logistics company customers may expand. The project would bolster these existing freight and manufacturing assets of the Calumet and the current economic development programs of the region in order to establish a more vibrant and competitive industrial cluster.

National Network for Manufacturing Innovation

The National Network for Manufacturing Innovation (NNMI), which includes regional hubs intended to “accelerate development and adoption of cutting-edge manufacturing technologies for making new, globally competitive products,” was launched last year by the White House. The ultimate goal is to build this initiative into a network of up to 15 regional Institutes for Manufacturing Innovation (IMIs). A proposed one-time $1 billion investment in the network would fund applied research and demonstration projects, education and training, development of innovative supply-chain integration, and engagement with SMEs. The NNMI is managed and funded by multiple federal agencies, including the U.S. Department of Defense, U.S. Department of Energy, the NIST, and the National Science Foundation. In 2012, a pilot NNMI was launched in Youngstown, Ohio for an additive manufacturing center. On May 9, 2013, the White House announced funding for three additional NMMIs with money from five federal agencies totaling $200 million. Each institute will have a different focus:

Digital Manufacturing and Design Innovation: Led by the U.S. Department of Defense, this institute will develop new, model-based design methods, virtual tools, and robotics to enhance factories by allowing them to become more agile and improve their responsiveness to market demands.
Lightweight and Modern Metals Manufacturing: Also led by the U.S. Department of Defense, this institute will scale-up research to enhance metal products such as wind turbines, medical devices, engines, armored combat vehicles, and airframes in order to generate significant reductions in manufacturing and energy costs.
Next Generation Power Electronics Manufacturing: Led by the U.S. Department of Energy, this institute will focus on developing wide bandgap technology, which will create more compact and efficient power devices.

Applications must include multiple partners representing different facets of innovation development and must include a local match by industry. Request for Information (RFI) responses are due June 6, 2013.

Regional Response
A partnership between the University of Illinois, the Illinois Science and Technology Coalition, industry leaders, and other stakeholders are collaborating to develop a response to the Digital Manufacturing and Design Innovation RFI. The collaborative would build on current assets including the region’s universities and specialization in manufacturing and promote growth for a more competitive manufacturing landscape.

Investing in Manufacturing Communities Partnership

Funded by the EDA’s Economic Adjustment Assistance Program, the Investing in Manufacturing Communities Partnership (IMCP) initiative is offering a new competitive grant to strengthen the ability of local communities to attract investment. With funding from multiple federal agencies, regional implementation-ready “strategy grants” will be awarded to applicants that focus on SMEs. Strategies should address gaps in the current industrial ecosystem and leverage existing assets to increase competitiveness and attract investment. Applications are due June 13, 2013.

In 2014, the U.S. Department of Commerce and several other federal agencies, through the IMCP, will issue five to six grants nationally of up to $25 million each. These grants could fund research centers, business incubators, education programs, infrastructure investments, export plans, and connections between supply-chain and stakeholders.

Conclusion

The GO TO 2040 comprehensive regional plan calls for the region to strategically promote economic growth based on existing and emerging clusters. As highlighted by CMAP’s manufacturing drill-down report, metropolitan Chicago’s manufacturers are in the midst of a strong resurgence, and they are well-positioned to compete in today’s globalized world. These new federal initiatives could allow the region’s manufacturers to capitalize on new opportunities for growth.

Springfield Snapshot, May 27-31, 2013

2013-05-31T19:13:02Z

The General Assembly is scheduled to conclude its spring session on May 31, 2013. The following Policy Update reviews action related to CMAP’s agenda and legislative framework from the week of May 27-31. CMAP’s recap of the spring 2013 session will be available on the Policy Updates blog next week.

Session Wrap-Up
The last hours of session will be devoted to some of the
most contentious issues the General Assembly faces, including the state budget, pension reform, gaming, fracking, and gun control. CMAP is closely monitoring several state agency budgets, including the Illinois Department of Natural Resources and Illinois Department of Transportation appropriations, currently in HB 214 and HB 215, respectively. In addition to setting funding for state programs and services, the fiscal year 2014 budget needs to address a backlog of bills and mounting pension costs. The final authorization needed to complete the 2009 capital bill, Illinois Jobs Now!, passed both chambers on Thursday morning in HB 2869, totaling $2.7 billion.

Pension reform negotiations continue. Two comprehensive proposals drove debate this session: House Speaker Madigan’s proposal (SB 1) emphasizes reform of four State pension systems and Senate President Cullerton’s bill (SB 2404) proposes reform by providing cost-cutting options for retirees. SB 1 was voted down on the Illinois Senate floor on Thursday night. Policy makers remain divided on whether the Madigan proposal is constitutional and if the Cullerton proposal would yield enough savings to address the state’s woefully underfunded pensions. Other reform proposals that make targeted adjustments are progressing in the Illinois Senate, including HB 1154 that would impose a pensionable salary cap, HB 1165 that would impose a cost of living adjustment (COLA) limitation, and HB 1166 that would increase the retirement age for several pension systems.

Transportation Funding
Yesterday, a proposal (HB 3637) was introduced that would overhaul how the State collects and distributes revenue for transportation projects. The bill aligns with the Transportation for Illinois Coalition (TFIC) proposal discussed this spring, which called for eliminating the current state motor fuel tax (MFT) and replacing it with a new wholesale tax based on the price of fuel. CMAP analyzed the TFIC proposal in a previous Policy Update. HB 3637 would impose a 9.5-percent wholesale tax on motor fuel, along with increases to vehicle registration and other fees. CMAP will continue to monitor the bills progress and be engaged in discussions about how to better meet our state’s infrastructure needs.

Economic Development
An amendment to SB 20, which would create the Economic Development Act of 2013, was voted out of the Illinois House of Representatives yesterday. The bill would facilitate development projects throughout the state, including a few in northeastern Illinois such as the brownfields redevelopment in the south suburbs and the south suburban airport. The bill has been sent to Illinois Senate Executive for concurrence on the amendments.

Bills Directly Affecting CMAP
One bill with direct impact on CMAP continues to advance through the legislative process. HB 3199 requires the Commission on Government Forecasting and Accountability to hold a hearing within 30 days after the Governor’s Budget Address to the General Assembly to consider CMAP’s annual report and its impact on the State budget. Status: HB 3199 sits on third reading in the Senate and has a deadline extension to May 31.

Other Bills Acted on This Week
Illinois Urban Development Authority (HB 1295) amends the Illinois Urban Development Authority Act to allow for the development, financing, and maintenance of transportation projects. Status: Passed in both chambers.

Open Space Land Grants (SB 1341) reduces the Open Space Lands Acquisition and Development (OSLAD) grant match requirement from the current 50 percent to 10 percent for communities that are distressed (defined in rules to be promulgated by the Illinois Department of Natural Resources). Status: Sits on second reading in the House.

Rental Multifamily Housing Development Trends in the CMAP Region

2013-05-31T15:56:55Z

While rental of single-family homes has grown in the region over the last decade, multifamily developments house the majority of the region’s renters. Since 2000, the region has experienced significant shifts in the balance of multifamily rental units, with a decrease prior to the recession and an increase during and after. Since 2000, construction of large new multifamily rental buildings has tended to be concentrated in the City of Chicago. During 2012 and the first quarter of 2013, however, new multifamily rental permits and construction shifted outward into suburban areas of the region. According to Reis, Inc, a provider of data on multifamily rental developments, this trend is projected to continue for the next several years. Compared to Chicago in the first quarter of 2013, suburban areas experienced higher year-to-year gains in terms both of permitted units and of completed and under construction large rental developments with 40 units or more.

Multifamily Units Since 2000
Post-recession gains in multifamily rental development in the region, while positive in terms of encouraging housing balance, must overcome a loss of multifamily rental units since 2000. For example, Reis, Inc., which tracks rental buildings with 40 units or more in Cook, DuPage, Kane, Lake, McHenry, and northern Will Counties, has collected data on the conversion of rental buildings to condominiums since 2003. From 2003-10, 4.2 percent of the units Reis, Inc. tracked were converted to condominiums. The region will not reach its 2003 levels of rental units in large buildings until later this year. According to U.S. Census and American Community Survey data, approximately 12 percent of the region’s multifamily rental units were converted to the for-sale market, demolished, or left vacant from 2000-07. By 2011, this loss had halved, likely due to a combination of new construction and rental of formerly for-sale units. Loss of multifamily rental units was concentrated in the region’s core, while Kane, Lake, and Will Counties gained multifamily rental units from 2000-11.

Click for larger image.

While the region gained rental units in buildings with 50 or more units from 2000-11, it lost rental units in all other multifamily building types. These losses were generally concentrated in the City of Chicago and suburban Cook County. The loss of multifamily rental units was most pronounced in buildings with 10 to 49 units, which declined by 20 percent from 2000-11, while owner-occupied units in 10 to 49 unit buildings increased by 23 percent over the same time period. Including vacant, for-rent, and for-sale units, total units in this building type declined by five percent from 2000-11.

Click for larger image.

The region’s decline in small multifamily building rental units may be due to currently vacant units, the continuing impact of foreclosures, demolition of these smaller buildings, or conversion to for-sale housing during the housing boom. A 2010 analysis of multifamily foreclosures in Chicago found that in 2009 alone, newly foreclosed multifamily properties contained nearly 20,000 rental units, with an average of three units per building. In many of these cases, tenants were evicted during the foreclosure process, leading to an increase in vacant rental units in small buildings and a loss of affordable rental options. Both the 2010 analysis and the Woodstock Institute’s 2009 report Roadblock to Recovery found that these foreclosures were concentrated in minority and low-income communities. Additionally, once vacant, these properties were found to be more likely to deteriorate to a condition that made their rehabilitation cost-prohibitive. There are also many roadblocks to obtaining loans for the purchase and renovation of these small rental buildings, particularly the two- to-four unit buildings that house 30 percent of the region’s renters.

Since 2007, the transition of many for-sale condominium units and buildings to the rental market has greatly reduced the region’s previous loss of multifamily rental units. However, the region still has approximately six percent less multifamily rental housing available today compared to 2000. In the near term, much of the unmet demand for multifamily rental units has shifted to rental of single-family homes and/or for-sale condominium units. This shift has the positive impact of providing more housing options for renters who may not desire a unit in a multifamily rental building, and it has also reduced vacancies in the for-sale market resulting from the housing crisis. However, it is unclear whether the recent increase in condominium and single-family rentals will be sustained over the long term.

Rents and Vacancy
Vacancy rates in the region’s large rental buildings with 40 units or more have plummeted to 3.7 percent since a recessionary peak of nearly seven percent in 2009, according to Reis, Inc. This vacancy rate is likely lower than the vacancy rate found in all multifamily rental buildings in the region. For example, the American Community Survey has estimated that rental vacancy rates ranged from a low of 5.6 percent in Lake County to 11.9 percent in Kane County in 2011.

Lower vacancies indicate a tighter rental market and often lead to rising rents. Recent increases in rent have outpaced household incomes. According to American Community Survey data, median rents in the region increased by nearly nine percent from 2007-11, but median household income declined by slightly more than two percent, leading to higher housing cost burdens. The number of households in the region that are rent-burdened, or households paying more than 30 percent of their income in rent, has increased by 18 percent from 2007-11. This follows a nationwide trend of increased housing cost burdens for both renters and homeowners. Data from Reis, Inc. indicates that rents in the region’s large rental buildings rose by a lesser 3.6 percent from 2007-11. Reis, Inc. projects accelerated increases in rent in the region’s large buildings, with average annual increases in rent of nearly 3.6 percent from 2013-17.

Development of New Multifamily Rental Buildings
Multifamily rental units under construction in the region have increased, following the trend of increasing multifamily building permits in 2012. While 2012 saw completion of few new rental units, a historically high number of units are under construction in the region. Reis, Inc. therefore projects that more new multifamily rental units in large buildings will be completed during 2013 and 2014 than any year since the company began collecting such data in 1990.

Click for larger image.

Also, following on the 2012 trend of more multifamily permits being issued in suburban areas, a higher proportion of the region’s multifamily rental units are now being constructed in suburban areas. While data from the U.S. Census and Reis, Inc. indicate that the majority of multifamily units were constructed in suburban areas prior to 2000, the 2000-10 period saw a significant shift of multifamily development, both rental and for-sale, into Chicago. According to Reis, Inc. data, from 2000-10, approximately 60 percent of large multifamily rental developments built in the region were within Chicago. In the latter half of the decade, that proportion rose to 87 percent. Of the currently under-construction multifamily rental projects in the region, 35 percent of the units are in suburban areas. Reis, Inc. projects that at least half of the region’s new multifamily units by 2014 will be built in suburban areas, with increasing proportions through 2017. This is a positive trend that supports livable communities, as recommended by GO TO 2040. Livability entails a balanced supply of owner-occupied housing and rental housing distributed throughout the region, ensuring that each household has access to the region’s assets.
Click for larger image.

Looking Forward
There have traditionally been many impediments to construction of multifamily rental developments in suburban areas. In the many communities that do not have zoning to allow development of rental buildings, developers must undertake long and costly approval processes when seeking to build rental housing. Additionally, many residents fear negative impacts from rental developments. While GO TO 2040 does not seek to increase density for its own sake, the plan does highlight adding density, particularly near transit assets, as one strategy to create livable communities. The addition of rental housing in areas served by transit is one method to add density and provide housing for residents at all stages of life. This diversity of housing options can help to create more vibrant, livable communities. Adding more housing options can help residents to live near where they work, reducing travel and congestion in the region. CMAP assists communities in planning for their future housing needs through the Homes for a Changing Region program.

Springfield Snapshot, May 20-24, 2013

2013-05-24T15:54:12Z

The General Assembly is scheduled to conclude its spring session in one week on May 31, 2013. The session’s final legislative deadline occurs today, May 24; bills in both chambers must have a third reading. The following Policy Update reviews action related to CMAP’s agenda and legislative framework from the week of May 20-24.

Budget
Before the General Assembly adjourns, legislators will have to pass the State’s fiscal year 2014 budget. In addition to setting funding for state programs and services, the budget needs to address a backlog of bills and mounting pension costs. Legislators will respond to some of the Governor’s spending reductions, such the $400 million from education. Appropriations committees met over the spring to consider Governor Quinn’s proposed $35.6 billion budget.

Pension Reform
Legislators are still considering two pension reform proposals. House Speaker Madigan’s proposal (SB 1) emphasizes reform of four State pension systems and Senate President Cullerton’s bill (SB 2404) proposes reform by providing cost-cutting options for retirees. Reboot Illinois created a summary graphic that compares the proposals.

CMAP also closely monitored SB 1594 this session, which proposes merging the Regional Transportation Authority (RTA) and CMAP. Status: SB 1594 was re-referred to the Assignments Committee in the Senate and is not expected to see any more action this session.

Other Bills Acted on This Week
RTA Issuance of Bonds (HB 1389) extends the deadline for the RTA to sell additional Working Cash Notes that are over and above the $100 million authorization to July 1, 2016, from its current deadline of 2014. Status: Passed in both chambers.

Toll Highway Expansion (HJR 9) authorizes the Illinois Tollway to build the Elgin O’Hare Western Access (EOWA) project. The Toll Highway Act requires a joint resolution of the General Assembly before the Tollway can issue bonds for or begin constructing a new Tollway. The resolution also calls on the Tollway to minimize environmental impacts, accommodate alternative modes of transportation, and support the involvement of diverse groups in the project and broader economic development in the corridor. This joint resolution is required for the EOWA project to move forward. Status: Resolution adopted. CMAP supports this resolution.

Infrastructure Finance Bill Introduced in Congress

2013-05-24T13:52:15Z

On May 22, 2013, the Partnership to Build America Act (H.R. 2084) was introduced into the U.S. House of Representatives. This bill would establish a $50 billion “American Infrastructure Fund” to be capitalized by the sale of 50-year bonds. These bonds would pay a 1-percent interest rate and would not be guaranteed by the federal government. To encourage private investors to invest in the American Infrastructure Fund, the bill would allow corporations to repatriate foreign earnings tax-free -- for every $1 invested in the fund, a corporation would be able to repatriate $4 from overseas. The American Infrastructure Fund would provide loans and loan guarantee to support investments in a variety of infrastructure projects, including transportation, water, energy, communications, and education.

The nation’s transportation system requires significant investments to maintain a state of good repair and to accommodate economic and population growth. Interest in innovative financing has grown in recent years as traditional funding sources, namely the gas tax, have failed to keep pace with needs. Proposals for a national infrastructure bank emerged as part of the discussion leading to the passage last summer of the transportation reauthorization bill, Moving Ahead for Progress in the 21^st Century (MAP-21), although none of the proposals were incorporated into the final bill.

GO TO 2040 supports the strategic use of innovative finance mechanisms, including public-private partnerships and value capture. These approaches should be considered on a project-by-project basis and may have merit in providing a portion of a particular project’s overall funding. However, GO TO 2040 recognizes that innovative financing cannot fully meet the region’s transportation funding needs and calls for an increase in traditional funding sources to provide an adequate level of resources.

Springfield Snapshot, May 13-18, 2013

2013-05-17T19:18:02Z

With two weeks left in the spring session, both the Illinois House of Representatives and Illinois Senate were in Springfield this week. One final legislative deadline remains before the General Assembly adjourns on Friday, May 31, 2013: Bills in both chambers must meet third reading deadlines by Friday, May 24. The following Policy Update reviews action from the week of May 13-17.

Pension Reform
Legislators in both chambers continue to deliberate over two very different proposals for resolving the State’s pension crisis. House Speaker Madigan’s proposal (SB 1) emphasizes reform of four State pension systems, restructuring how much money some retirees could receive and when they would be eligible for retirement benefits. Opponents contend that the measures would be deemed unconstitutional by the State Supreme Court. The second bill under consideration is Senate President Cullerton’s (SB 2404), developed in collaboration with public employees’ unions (see their summary of the bill). Opponents of this bill contend that reforms would fall far short of making a sufficient fiscal impact.

Transportation Funding
To build support for a new capital program, the Transportation for Illinois Coalition (TFIC) continues to engage stakeholders across Illinois regarding the state’s long-term infrastructure needs. CMAP is engaged in these discussions and advocating for reform in the potential capital program. Last week, CMAP launched an interactive website that articulates the need for performance-based funding of highway and bridge projects. This approach would improve current transportation programming practices by enabling transparent, data-driven investment decisions and consistent collaboration among stakeholders.

Additionally, TFIC released a proposal to eliminate the state motor fuel tax (MFT) and remove motor fuel from the 6.25-percent state sales tax base, which would then be replaced with an 18-percent wholesale tax on motor fuel. While TFIC argues that the MFT-wholesale tax swap would address the MFT's vulnerability to inflation, a recent Policy Updates blog analyzes the substantial impacts of volatility in fuel prices on the proposal's revenue yields and equity.

CMAP also closely monitored SB 1594 this session, which proposes merging the Regional Transportation Authority (RTA) and CMAP. The bill missed its third reading deadline in the Senate.

Other Bills Acted on This Week
Property Tax-Green Energy SSA (HB 67) allows two distinct new authorities: first, counties or municipalities may create a green special service area (SSA) and levy related taxes; second, the Illinois Finance Authority may purchase SSA bonds and accept assignments or pledges of public or private green SSA projects. Green projects are any installation, modification, or replacement that reduces energy consumption in any residential, commercial, or industrial building, structure, or other facility. Status: Assigned to House Property Tax Subcommittee.

RTA Board Benefits Elimination (HB 140) eliminates compensation and pension benefits for RTA and transit service board members who are appointed on or after the effective date of the amendatory Act. Status: Passed in both chambers.

Water and Sewer Utilities Value (HB 1379) provides an alternative procedure that a large public utility may choose in establishing the ratemaking base of a water or sewer utility that the large public utility is acquiring. Status: Passed in both chambers.

Stormwater Management (HB 1522) allows DuPage and Peoria Counties to impose user fees for stormwater management. Status: Passed in both chambers. CMAP supports this legislation.

Urban Composting (HB 2335) allows compost piles of up to 25 cubic yards to be exempt from permit and removes limits to certain Chicago permitted facilities. The bill also allows for on-farm composting exemptions to urban/suburban areas on up to two percent of their property with materials brought off site. Status: Passed in both chambers.

Counties Reduction Efficiency (SB 494) establishes a local government reduction and efficiency pilot program whereby DuPage County can develop a process to dissolve some local units of government. Status: Passed in both chambers. CMAP supports this legislation.

Township Code-Singular Dissolution (SB 1585) provides a process by which a single township within a county under township organization could dissolve. Amendments limit the provisions to townships within a coterminous, or substantially coterminous, municipality in which the City Council exercises the powers and duties of the township board, or in which one or more municipal officials serve as an officer or trustee of the township. Status: Passed in both chambers.

Toll Highway Expansion (HJR 9) authorizes the Illinois Tollway to build the Elgin O’Hare Western Access (EOWA) project. The Toll Highway Act requires a joint resolution of the General Assembly before the Tollway can issue bonds for or begin constructing a new Tollway. The resolution also calls on the Tollway to minimize environmental impacts, accommodate alternative modes of transportation, and support the involvement of diverse groups in the project and broader economic development in the corridor. This joint resolution is required for the EOWA project to move forward. Status: On the Senate calendar of resolutions. CMAP supports this resolution.

Analysis of Proposed Motor Fuel Sales Tax

2013-05-17T19:02:12Z

As the Illinois Jobs Now! state capital program comes to a close, some transportation and business leaders have led discussions to identify revenues for a new capital program. In May 2013, the Transportation for Illinois Coalition (TFIC) proposed to eliminate the state motor fuel tax (MFT) and remove motor fuel from the 6.25-percent state sales tax base, which would then be replaced with an 18-percent wholesale tax on motor fuel. The proposal includes a hold-harmless provision that would return an amount equivalent to the revenues from the existing 6.25-percent state sales tax to the general revenue fund. After accounting for this hold-harmless provision, the proposal amounts to an effective 11.75-percent motor fuel sales tax rate for transportation. Further, TFIC proposes increasing both vehicle registration fees and certificate-of-title fees by $10 annually. Together, the wholesale tax and new fees would bring in a total of $1 billion in new revenues annually for the transportation system, as estimated by TFIC.

With these new revenues, TFIC proposes spending 80 percent of the new revenues on roads, bridges, the CREATE freight rail program, and airports. The remaining 20 percent of new funds would be dedicated to transit and rail improvements. Of the new revenues raised, 60 percent would be spent annually through a pay-as-you-go program and 40 percent would be dedicated to support a bond program. Further, the TFIC proposal would streamline the flow of transportation funds in Illinois, although no specifics are yet available; the proposal also does not discuss the allocation of existing transportation revenues. This Policy Update analyzes the proposed MFT sales tax swap, focusing on the substantial impacts of volatility in fuel prices on revenue yields and equity.

Volatility
TFIC argues that an MFT-wholesale tax swap would address the MFT’s vulnerability to inflation, because sales tax revenues would rise with prices while MFT revenues remain constant per gallon. Earlier this year, Virginia became the first state to implement an MFT-motor fuel sales tax swap.

Gas prices have risen over time, and, under the proposed swap, wholesale tax revenues would have risen in tandem. However, the price of gasoline is unstable, changing from day-to-day and week-to-week. This volatility has been especially pronounced over the past decade due to political instability in oil-producing regions, large natural disasters, and major shifts in larger economic activity. The following chart shows the average retail price of a gallon of gasoline in Illinois from 2000-11. During that period, prices ranged from as little as $0.74/gallon in early 2002 to as high as $3.55/gallon in the summer of 2008, representing a nearly five-fold increase in price between those two extremes.

Click for larger image.

The following chart compares revenue estimates from an effective 11.75-percent motor fuel sales tax rate to the actual revenues from the state MFT, as well as the estimated revenues from an MFT that was indexed to inflation in construction costs beginning in 2000. GO TO 2040 calls for an 8-cent increase in the state MFT, indexed to inflation.

The actual MFT revenues demonstrate a fairly consistent revenue yield (about $1 billion) between 2000 and 2010, and the indexed MFT would have initially experienced a gradual increase in revenues, with receipts leveling off after 2007. In contrast to both the MFT and indexed MFT, revenues from the TFIC-proposed sales tax-based sources would have varied considerably during between 2000 and 2010. The effective 11.75-percent motor fuel sales tax rate, for example, would have brought in $2.1 billion in 2008, but only $625 million in 2002 -- a more than 200 percent change in only six years. Furthermore, it would have raised $2.1 billion in revenues 2008 but only $1.3 billion in 2009, representing a decline of about 35 percent in only one year.

Click for larger image.

Transportation projects can be long and expensive. Complex, multiyear projects depend on stable, predictable revenue sources to be adequately financed and completed on time. Additionally, some programs of projects must be completed in a logical sequence to minimize traffic disruption, take advantage of economies of scale, and meet engineering requirements. A revenue stream largely driven by the price of gas could undermine the State’s ability to properly plan for its capital improvements. Furthermore, a highly volatile revenue source may prove to be less attractive to investors, limiting the State’s ability to issue bonds off a motor fuel sales tax.

Equity
In terms of equity, the per-gallon MFT is already considered somewhat “regressive,” since low-income households typically spend a larger percentage of their income on gas relative to higher income households. Sales taxes are also typically regressive, which would be further exacerbated by large upward fluctuations in fuel prices. The following chart shows the proportion of household income that would be spent on the current MFT versus an 11.75-percent motor fuel sales tax rate. The proposed motor fuel sales tax is then shown under two different base gas prices, before taxes: $2.77 and $3.77. The burden is compared among lower ($42,753), middle ($93,712), and higher income ($144,670) households.

Each bar on the chart represents a given tax and income level for a household driving 12,000 miles per year in a lower fuel economy vehicle that gets 23.6 miles per gallon on average. The proportion levels may be higher or lower depending on actual levels of driving and vehicle fuel economy.

Click for larger image.

Currently, a household with income of $42,753 pays up to 0.23 percent of their annual income toward the current state MFT, while a household with income of $144,670 would only pay up to 0.07 percent annually. This dynamic remains the same regardless of the price of gas, since the current MFT is imposed on a per-gallon basis.

However, under a proposed 11.75-percent motor fuel sales tax rate and assuming a base gas price of $2.77, households with income of $42,753 would pay up to 0.41 percent of their income (a 0.19 percentage point increase over the current MFT). Meanwhile, a household with income of $144,670 would pay 0.12 percent of their income (only a 0.05 percentage point increase over the current MFT). These differences become more marked as gas prices rise to $3.77. In this scenario, a household with income of $42,753 would pay 0.55 percent of their income (a 0.32 percentage point increase over the current MFT), while a household with income of $144,670 would pay 0.16 percent of their income (only a 0.09 percentage point increase over the current MFT).

If the 19-cent MFT were indexed annually to an inflationary measure, households would experience a greater tax burden over time compared to the current MFT. However, unlike the proposed motor fuel sales tax in which regressivity always increases with the price of gas, the regressivity of an inflation-indexed MFT would only increase if income levels did not keep pace with inflation.

In sum, while the existing per-gallon MFT is already a regressive tax, an 11.75-percent sales tax rate on fuel is almost guaranteed be more regressive, and this dynamic will intensify as fuel prices rise. The only scenario (not shown on the chart) in which a sales tax on gas would be less regressive than the current MFT is if fuel prices were to fall to a level much lower than today. Specifically, a base price of $1.43 per gallon would result in the same level of regressivity for both taxes, and below this point a sales tax on gas would actually be less regressive than a per-gallon MFT. Of course, Illinois fuel prices have generally been far above base prices of $1.43 per gallon in recent years, and fuel prices tend to be higher in the Chicago area than the State as a whole.

Conclusion
TFIC proposes an overhaul of how Illinois pays for transportation projects. CMAP supports this kind of robust statewide discussion, and many aspects of the TFIC proposal are consistent with the principles adopted on May 1, 2013, by the CMAP Board to guide the development of a new state capital program. CMAP supports new user-fee generated revenues, a movement toward more performance-based funding, and the provision of dedicated capital funding for transit.

CMAP’s analysis of this proposed tax swap shows that the volatility of a motor fuel sales tax could be substantial, making it difficult for implementing agencies to effectively plan for transportation investments. This volatility would also mean that the burden on lower income households could change substantially depending on the price of gas. Nevertheless, gas prices have generally risen over time, so revenues from a motor fuel sales tax may track inflation better than the traditional MFT. It is also important to note that using gasoline consumption as the basis for taxation, whether for the traditional MFT or a motor fuel sales tax proposal, will become increasingly less tenable over the long term as fuel economy continues to improve. CMAP’s analysis of the recently-announced federal Corporate Average Fuel Economy (CAFE) standards suggests that MFT receipts could decline by one third by 2040 compared to original forecasts.

CMAP is encouraged that serious discussions are underway about the need to invest in our transportation infrastructure. The TFIC proposal recommends only one initial scenario -- a major tax swap -- as a method for raising more revenue. Another scenario could simply be to raise and index the existing MFT, as GO TO 2040 recommends. CMAP also believes it is essential to implement performance-based funding for transportation -- a transparent, accountable, and merit-based approach to prioritizing projects, as described at www.cmap.illinois.gov/performance-based-funding/. CMAP encourages the state’s policymakers to broaden the conversation to address these issues and will monitor these activities closely in coming weeks as the legislative season unfolds.

Springfield Snapshot, May 6-10, 2013

2013-05-17T18:50:17Z

Both the Illinois House of Representatives and Illinois Senate were in session this week. Three weeks remain in this legislative session, and bills must advance out of second chamber committees by Friday, May 10, 2013. One final legislative deadline remains before the General Assembly adjourns on Friday, May 31 -- bills in both chambers must meet third reading deadlines by Friday, May 24. The following Policy Update reviews action from the week of May 6 - 10. For a more in-depth analysis of state legislative activity thus far this session and a list of bills CMAP is monitoring, see the most recent state legislative update memo to the CMAP Board.

Pension Reform
Intense debate continues in both chambers around proposals to address the State’s pension crisis. The House passed two amendments to Senate President Cullerton’s pension reform proposal SB 1. The amended measure aims to stabilize and bring solvency to four of the State’s pensions with approximately $140 billion in savings by 2045. Speaker Madigan’s proposal, which passed last week in the House, was sent back to the Senate for concurrence. Opponents contend that this proposal would not fulfill the State’s constitutional obligation regarding pension benefits, which sets forth that pensions “shall not be diminished or impaired.”

This week, Senate President Cullerton put forth a new proposal (SB 2404) developed in collaboration with public employees’ unions. The bill has passed out of the Senate and could be considered in the House in coming days. Proponents estimate this bill would save the State $45 to $51 billion in pension payments over the next 30 years. This new proposal provides more options for current employees and retirees to choose from with regard to cost-of-living adjustments and health insurance. Opponents of this bill argue that it does not make a sufficient financial impact on the State’s woefully underfunded pension systems.

State Capital Program
Stakeholders continue to discuss the state’s longer-term infrastructure needs. The Transportation for Illinois Coalition (TFIC) has convened numerous meetings about the state’s infrastructure needs to build support for a new capital program. CMAP is engaged in these discussions and advocating for reform in the potential capital program. At its meeting on May 8, the CMAP Board considered and approved capital program principles. Additionally, CMAP launched an interactive website that articulates the need for performance-based funding of highway and bridge projects. This approach would improve current transportation programming practices by enabling transparent, data-driven investment decisions and consistent collaboration among stakeholders.

CMAP also closely monitored SB 1594 this session, which proposes merging the Regional Transportation Authority (RTA) and CMAP. The bill missed its third reading deadline in the Senate.

Other Bills Acted on This Week

Illinois Urban Development Authority (HB 1295) amends the Illinois Urban Development Authority Act to allow for the development, financing, and maintenance of transportation projects. Status: Sits on third reading in the Senate.

RTA Issuance of Bonds (HB 1389) extends the deadline for the RTA to sell additional Working Cash Notes that are over and above the $100 million authorization to July 1, 2016 from its current deadline of 2014. Status: Sits on second reading in the Senate.

Urban Composting (HB 2335) allows compost piles of up to 25 cubic yards to be exempt from permit. Removes limits to certain Chicago permitted facilities. The bill also allows for on-farm composting exemptions to urban/suburban areas on up to two percent of their property with materials brought off site. Status: Sits on third reading in the Senate.

Counties Reduction Efficiency (SB 494) establishes a local government reduction and efficiency pilot program whereby DuPage County can develop a process to dissolve some local units of government. Status: Sits on third reading in the in the House. CMAP supports this legislation.

CNT Releases Analysis of Demographic Change Near the Region’s Transit Stations

2013-05-17T18:49:04Z

The Center for Neighborhood Technology (CNT) recently released Transit-Oriented Development in the Chicago Region: Efficient and Resilient Communities for the 21^st Century. The report analyzes population and employment change from 2000-10 within one-half mile of the region’s rail transit stations as compared to the region as a whole, as well as four peer regions (New York, Philadelphia, Boston, and San Francisco). The analysis finds that population and households near northeastern Illinois transit stations increased at a slower rate than the region as whole and peer regions. Additionally, housing costs and household incomes rose faster within the region’s station areas as compared to the region as a whole, indicating a potential loss of affordable housing near rail transit stations. The analysis provides case studies of six station areas, examining the population and employment changes that occurred in these stations and the policies and plans that affected those changes.

GO TO 2040 recommends linking planning for transit, housing, and land use as a guiding principle for planning for livable communities. It urges counties and municipalities to encourage dense, mixed-use development in location-efficient areas near transit stations. Recognizing that the high demand for living near transit can increase the cost of housing in these areas, the plan recommends that municipalities plan for affordable housing needs and promote development of affordable housing near transit. Through its Homes for a Changing Region program, CMAP assists communities in developing policy plans that will create a balanced mix of housing, enhance livability, and serve current and future residents.

CMAP Launches New Microsite on Performance-Based Funding

2013-05-17T18:38:59Z

On May 8, 2013, CMAP launched a new microsite about performance-based funding, which is a data-driven, transparent, and collaborative approach to planning and programming transportation funds. GO TO 2040 recommends that transportation funding decisions be based on transparent evaluation criteria, and calls on the region’s transportation stakeholders to develop and utilize the necessary performance measures. In an era of constrained public resources, it is essential that investment decisions make progress toward established goals, and that each project be evaluated through a transparent process based on clear criteria.

The microsite describes how funds currently flow through the State of Illinois highway program, which operates under longtime policy constraints that include the so-called "55/45 split." Based not on law but on an informal agreement established decades ago within the General Assembly, this arbitrary formula directs 45 percent of transportation funds to northeastern Illinois and the remaining 55 percent downstate, despite the fact that our region contributes a much higher than 45-percent portion to the state's economy.

In October 2012, the CMAP Board and MPO Policy Committee called on the Illinois Department of Transportation to establish a technical advisory group to begin the process of developing a performance-based funding system. In February 2013, Representative Elaine Nekritz filed HB 1549. This bill was broadly similar to the CMAP proposal, and the CMAP Board voted to support it in principle. Although HB 1549 did not advance out of committee before a March 2013 deadline, CMAP will continue to advance this important issue.

Performance-based funding has been a top CMAP priority since the approval of GO TO 2040 over two years ago. The new microsite joins an Issue Brief, numerous Policy Updates, and agenda items to the CMAP Board and MPO Policy Committee. For a full summary of CMAP staff’s activities on performance-based funding since July 2011, view this compendium.

Springfield Snapshot, April 29-May 2, 2013

2013-05-17T18:51:09Z

Both the Illinois House of Representatives and Illinois Senate were in session this week. Four weeks remain in this legislative session, and bills need to have advanced to the other chamber or received an extension from leadership to advance through the legislative process. Bills also must advance out of second chamber committees by Friday, May 10, 2013. The following Policy Update reviews action from the week of April 29 – May 2. For a more in-depth analysis of state legislative activity thus far this session, see the most recent state legislative update memo, which will be discussed at CMAP’s board meeting on Wednesday, May 8.

Pension Reform
The House took significant legislative steps to address the state’s pension crisis. House Speaker Madigan introduced significant amendments to Senate President Cullerton’s pension reform proposal S B1. The adopted measure, HA 1, aims to stabilize and bring solvency to four of the State’s pensions by 2044. The funds included are: the General Assembly Retirement System, the State Employees’ Retirement System, the State Universities Retirement System, and the Teachers’ Retirement System. The legislation’s reforms include requiring the State to make $1 billion in supplemental contributions starting in Fiscal Year (FY) 2020 until the four pensions are 100 percent funded. Additionally, the legislation obligates the state to face adjudication if it fails to obligate said supplemental funds. Other measures directly impact the employees and retirees: the bill establishes a pensionable salary cap, sets forth a new method for calculating the cost of living adjustment, raises the retirement age for employees under the age of 45, and increases worker contributions by two percent. The bill also prohibits non-governmental organizations from participating in the State’s pensions systems and prevents pensions from being subject to collective bargaining. The amended legislation passed in the House on Thursday, May 2, and was sent back to the Senate for concurrence.

State Capital Program
Stakeholders continue to discuss the state’s longer-term infrastructure needs. Transportation for Illinois Coalition (TFIC) has convened numerous meetings to discuss the state’s infrastructure needs in order to build support for a new capital program. CMAP is engaged in these discussions and will present a series of capital program principles at its Board meeting next Wednesday.

Tax Policy
On Thursday, May 2, the House Revenue and Finance Committee held a subject-matter hearing regarding sales tax sourcing. The purpose of the hearing was to gather more information about the State’s revenue generation and collection of sales taxes. Several stakeholders provided testimony, including the Taxpayers’ Federation of Illinois (TFI) and the Regional Transit Authority (RTA). TFI testimony reviewed current law and its analysis of recent proposals such as Retailers’ Occupation Tax Act Sourcing (HB 3249). The RTA expressed its continued concern about the State’s ability to collect sales tax from businesses operating within the RTA’s service area. The General Assembly is expected spend the remainder of the session discussing the State’s revenues, as well as proposed FY 2014 budget allocations.

Bills Directly Affecting CMAP
One bill with direct impacts on CMAP continues to advance through the legislative process. HB 3199 requires the Commission on Government Forecasting and Accountability to hold a hearing within 30 days after the Governor’s Budget Address to the General Assembly to consider CMAP’s annual report and its impact on the State budget. Status: HB 3199 passed unanimously out of the Senate Transportation Committee; it sits on second reading in the Senate.

CMAP also closely monitored SB 1594 this session, which would have merged the RTA and CMAP. The bill missed its third reading deadline in the Senate.

Other Bills Acted on This Week

RTA Board Benefits Elimination (HB 140) eliminates compensation and pension benefits for RTA board members. Status: Awaits hearing in the Senate Licensed Activities and Pensions Committee.

Counties Reduction Efficiency (SB 494) establishes a local government reduction and efficiency pilot program whereby DuPage County can develop a process to dissolve some local units of government. Status: Assigned to Counties and Townships Committee in the Senate.

Counties Affordable Housing (SB 1244) establishes an Affordable Housing Trust Fund pilot program in Lake County. The legislation also gives Lake County the authority to impose a $3 recording fee on real estate transactions to be deposited in a trust fund. Status: Assigned to Housing Committee in the House. CMAP supports this legislation.

Toll Highway Expansion (HJR 9) authorizes the Illinois Tollway to build the Elgin O’Hare Western Access (EOWA) project. The Toll Highway Act requires a joint resolution of the General Assembly before the Tollway can issue bonds for or begin constructing a new Tollway. The resolution also calls on the Tollway to minimize environmental impacts, accommodate alternative modes of transportation, and support the involvement of diverse groups in the project and broader economic development in the corridor. This joint resolution is required for the EOWA project to move forward. Status: Referred to Senate Assignments. CMAP supports this bill.

Cook County Releases Economic Development Agenda

2013-04-30T22:01:28Z

On April 4, 2013, Cook County released an economic development agenda, Partnering for Prosperity. Eight of the nine agenda strategies directly align with GO TO 2040 recommendations. The following Policy Update provides a brief overview of the agenda, which addresses the county’s role in the metropolitan Chicago economy, and describes the many areas in which Partnering for Prosperity overlaps with the GO TO 2040 comprehensive regional plan. The agenda, which was developed with support from Cook County Board President Toni Preckwinkle and her Council of Economic Advisors, also aligns with recommendations from World Business Chicago’s Plan for Economic Growth and Jobs and the Chicagoland Chamber of Commerce-commissioned Organisation for Economic Co-operation and Development’s study of the broader tri-state region.

The agenda includes analysis of the region’s clusters, human capital, land use, the housing-jobs balance, and opportunities for innovation and entrepreneurship. It seeks to strengthen partnerships between the county’s public and private sector challenges and build on the area’s many (often overlooked) assets like freight and manufacturing. The agenda focuses first on governance strategies to make Cook County more attractive for business investment. Next, the agenda outlines strategies to support the region’s primary drivers of growth: manufacturing and transportation. The agenda concludes with support strategies to both keep the county and region competitive and enable residents and commerce to flourish.

Improving County and Municipal Governance and Collaboration
The agenda’s strategies to improve governance focus on increasing the return on taxpayer investments. These strategies, such as identifying steps to improve transparency, efficacy, and accountability in County government and consolidating local service provision by suburban governments, echo GO TO 2040’s recommendations to pursue coordinated investments. The agenda describes how Cook County can build on existing initiatives and engage partners like CMAP to explore opportunities to share services and centralize capacities.

Cook County is home to 121 municipalities, many of which could be better served by collaborating on economic development and business attraction activities. The agenda suggests Cook County create an “Economic Growth Institute” to take on multijurisdictional projects that identify and develop better-targeted, mutually beneficial development plans. The institute would carry out analytic, business-planning, and implementation activities across municipalities that typically have limited staff resources for such activities.

Fostering Economic Growth through Manufacturing and Transportation
The agenda’s production strategies focus on supporting manufacturing and transportation industries. Cook County has a high concentration of manufacturing employment, and the agenda calls for supporting two particularly dominant industries -- fabricated metals and food processing and packaging. For a number of reasons, including shifts in the global economy, increased use of science, engineering, and technology in product development, and the region’s transportation assets, these industries are particularly poised for growth according to CMAP’s recent manufacturing cluster drill-down report.

Modern manufacturing requires firms to produce goods in a matter of weeks, not months. Local fabricated metal producers are well-positioned to develop competitive supply chains because of the region’s robust freight assets. Fabricated metals manufacturing is dominated by small- and medium-sized firms that often produce intermediary products for other important regional manufacturers like auto parts, industrial machinery, or medical equipment. Assisting fabricated metal manufacturers with workforce training and other assistance will indirectly support the region’s dominant end-product industries.

Food manufacturing has long been a strength of the region. Area manufacturers continue to innovate in the areas of processing and packaging at a time when demand for convenient foods with smart packaging is increasing. These recommendations to focus on specializations in the regional economy are aligned with CMAP’s manufacturing cluster drill-down report; the agenda’s next steps echo the drill-down’s calls for aligning workforce training to meet the needs of these changing industries and developing cluster support strategies to bolster further innovation.

Though manufacturing has been a longstanding strength of the region’s economy, metropolitan Chicago needs to improve the quality and efficiency of the region’s transportation infrastructure to maintain that competitive advantage. The agenda calls for the County to partner with other stakeholders in the region, including CMAP, to implement many of GO TO 2040’s recommendations to increase commitment to public transit. The agenda specifically recommends improving multimodal transportation, replacing ridged funding formulas with strategic planning and resource allocation, and developing permanent capital funding sources for maintaining and expanding the region’s existing system. Additionally, the agenda calls for the County to become more engaged with freight-related infrastructure issues and proposes the development of a freight mobility and land use plan to better-coordinate its various departments and municipalities.

Supporting Communities and Workforce Development
The agenda closes with community and workforce development strategies. The region is challenged to some extent by a “spatial mismatch” between where residents live and work. The agenda mirrors many of GO TO 2040’s recommendations to strengthen livable communities by promoting mixed-use, dense, and well-connected communities as appropriate. Finally, human capital remains one of metropolitan Chicago’s most pressing challenges. As a whole, higher-skilled occupations are growing while lower-skilled occupations are stagnant or contracting, but the region’s workforce is not keeping up. The region’s education and workforce training institutions must ensure that students are developing needed skills for rapidly advancing industries.

Next Steps
Partnering for Prosperity identifies several areas where CMAP and the County can collaborate to improve transportation and freight in the region. There is a clear connection between sustainable economic development and investing in region’s transportation infrastructure through improving public transit and managing congestion. The agenda highlights CMAP’s congestion pricing initiative as “a cost-effective way to improve traffic flow.” The County’s support of this initiative could help regional stakeholders understand the importance of this innovative strategy to address the region’s costly roadway congestion.

Cook County will now focus on implementing the agenda’s recommendations, in part through their incorporation into the County’s operations and the development of a system to monitor economic development performance. The agenda’s implementation will be an important step towards achieving the regional vision set forth by GO TO 2040.

Springfield Snapshot, April 22-26, 2013

2013-04-26T20:27:35Z

The Illinois Senate convened this week for an abbreviated three-day session. The Illinois House of Representatives did not meet but will return to Springfield on Tuesday, April 30, 2013. CMAP has been tracking over 350 bills this session, but very few bills remain active. On Thursday, April 25, bills originating in the Senate needed to pass the third reading deadline. The corresponding deadline in the Illinois House was on April 19. Bills that did not meet those deadlines will require extensions from House and Senate leadership to advance through the legislative process. The following Policy Update discusses action from the week of April 22-26.

State Budget
Several Senate committees met this week to discuss the FY 2014 budget proposals. On April 25, the Illinois Senate Appropriations II Committee met to consider budget proposals for several state agencies, including the Illinois Department of Transportation (IDOT). Secretary Ann Schneider updated the committee on the status of recent IDOT projects, including the Illinois Jobs Now! capital program and federal stimulus funding. Recent CMAP Policy Updates examine IDOT’s annual update to the five-year transportation program and revenue shortfalls faced by the state capital program. Stakeholders have recently begun meeting to discuss the state’s longer-term infrastructure needs. Transportation Funders for Illinois (TFIC) has convened numerous meetings around the state to discuss communities’ diverse infrastructure needs.

The Senate did not take any legislative steps to address the state’s pension crisis. As policymakers and residents grapple with the gravity and complexity of the issues, a few recent efforts have attempted to shed light on the State’s budget. Crain’s Chicago Business launched an interactive on-line tool that allows the user to explore options for resolving the budget crisis.

Bills Directly Affecting CMAP
Two bills with direct impacts on CMAP continue to advance through the legislative process. The first (SB 1594) would merge the Regional Transportation Authority (RTA) and CMAP, calling for the formation of a transition committee to develop detailed plans to integrate staff and operations. Status: SB 1594 is sitting on third reading in the Senate.

The second bill (HB 3199) requires the Commission on Government Forecasting and Accountability to hold a hearing within 30 days after the Governor’s Budget Address to the General Assembly to consider CMAP’s annual report and its impact on the State budget. Status: HB 3199 was assigned to Senate Transportation Committee; it will be considered in a hearing on April 30 at 5:00 p.m. in Springfield.

Other Bills Acted on This Week

RTA Board Benefits Elimination (HB 140) eliminates compensation and pension benefits for RTA board members. Status: Assigned to Senate Licensed Activities and Pensions Committee.

Water and Sewer Utilities Value (HB 1379) provides an alternative procedure that a large public utility may choose in establishing the ratemaking base of water or sewer utility that the large public utility is acquiring. Status: Assigned to Senate Energy Committee.

RTA Fare Increase Hearings (HB 2453) requires both the Mass Transit Committee in the House and the Transportation Committee in the Senate to hold a public hearing regarding any increase in the revenue recovery ratio or any increase in fares or charges for public transportation. Status: Assigned to Senate Revenue Committee.

Counties Reduction Efficiency (SB 494) establishes a local government reduction and efficiency pilot program whereby DuPage County can develop a process to dissolve some local units of government. Status: Passed unanimously out of the Senate.

Counties Affordable Housing (SB 1244) establishes an Affordable Housing Trust Fund pilot program in Lake County. The legislation also gives Lake County the authority to impose a $3 recording fee on real estate transactions to be deposited in a trust fund. Status: Arrived in the House. CMAP supports this legislation.

Township - Singular Dissolution (SB 1585) provides a process by which a single township within a county under township organization could dissolve. Amendments limit the provisions to townships within a coterminous, or substantially coterminous, municipality in which the City Council exercises the powers and duties of the township board, or in which one or more municipal officials serve as an officer or trustee of the township. Status: Assigned to House Counties and Townships Committee.

Quarterly Edition of Illinois Innovation Index Analyzes Region’s Building Blocks of Innovation

2013-04-25T21:56:48Z

Innovations from companies across the state fuel economic growth, creating new goods and services that are faster, cheaper, and better than what came before. Capital and research investments are central to these efforts. The 2013 Quarter 1 edition of the Illinois Innovation Index provides the most recent data on four of these building blocks of innovation—academic research and development (R&D), venture capital investment, loans to small businesses, and broadband business connections—that help turn promising ideas into novel products and processes. GO TO 2040 recommends improving data and information systems on innovation so that policymakers, investors, and business leaders can make better-informed decisions. The Index -- a collaborative effort between CMAP and the Chicagoland Chamber of Commerce, Illinois Science and Technology Coalition, and World Business Chicago -- tracks a broad set of metrics to measure the innovation economy of the region and state.

Rebound from Recession
Together, the Index’s four capital indicators help illustrate metropolitan Chicago’s rebound in innovation investments following the most recent recession. This rebound is most notable in venture capital investments and lending to small businesses, which both experienced sharp funding declines in the region between 2007-09. Since that time, annual venture capital investments in the region have rapidly increased from a low of near $300 million in 2009 to $1.3 billion in 2011. Indeed, the Index notes that the 111 regional companies funded by venture capital last year was more than twice the annual average from 2006-10.

Like venture capital investments, lending to small businesses plummeted during the recession but has recently picked up, although at a slower rate compared to other capital indicators. In 2011, small businesses in metropolitan Chicago received loans totaling nearly $7 billion to finance expansion and innovation efforts, an increase over the last three years but still below pre-recession numbers. Future innovations in the region will rely in part on the availability of both venture capital and small business loans that provide needed resources to finance the development and commercialization of a promising idea. The continued expansion of these two building block indicators can help bolster the next generation of regional innovations.

Lending to regional small businesses has recovered from the recession’s downward pull yet still trails prior levels.
Source: Illinois Innovation Index, 2013.

In addition to capital investments, regional innovation infrastructure can help novel ideas flourish. The other two indicators featured in the quarterly index gauge the region’s standing in two of the most prominent innovation measures: academic R&D expenditures and broadband infrastructure. Like the capital indicators, academic R&D at local universities has expanded by $63 million between 2010-11 for an increase of nearly four percent. Further, business broadband connections across the state grew above the national average, increasing 232 percent between 2009-11. The uptake in these measures mimics the two capital indicators; all four show regional progress since the recession in rebuilding the foundation to support future innovations.

Challenges Ahead
While the region’s recovery in capital and research indicators is promising, the same indicators show the region underperforms compared to other metropolitan areas in innovation funding. For example, the Chicago region is the nation’s third largest metropolitan area -- yet with $1.7 billion in academic R&D in 2011, the region ranked eighth nationally, trailing much smaller areas such as Baltimore and Durham, North Carolina. A key challenge moving forward is how to maintain and augment innovation in the region’s existing investments in the wake of increased federal budgetary constraint.

While the private sector funds venture capital investments, the quarterly Index’s other three indicators -- academic R&D, lending to small businesses, and broadband infrastructure -- all rely on sizable investments from federal agencies. For example, private broadband infrastructure has been supported by substantial federal investments, including $7.2 billion to expand broadband access across the country. The federal Small Business Administration facilitates lending and improves access to capital for small firms. Its 7(a) Loan Program helps more small firms obtain financing for expansion activities. Like other states, Illinois receives the majority of academic R&D funding from the federal government. As these three vital building blocks of innovation all rely in part on considerable federal support, they are vulnerable to the uncertainty and possible cutbacks in federal innovation funding.

Academic research and development funding by source, 2011

Like other states, Illinois receives the majority of academic R&D funding from the federal government.
Source: Illinois Innovation Index, 2013.

Responding to Changing Innovation Investment Dynamics
Analysis in the quarterly edition of the Index provides strategies that can help metropolitan Chicago build off its rebound in innovation indicators, even with lingering federal budget uncertainty. To offset any future decline in federal support, metropolitan Chicago could focus on increasing business contribution to academic R&D -- businesses in Illinois currently fund only four percent of total academic R&D, a lower rate than many of the nation’s other top states.

In North Carolina -- home to the nation’s largest technology park connecting firms to university research -- businesses fund academic research at a rate three times higher than that in Illinois. But, as the Index points out, there are promising models as well within the region on how to diversify innovation funding streams. To better-attract private firms to invest in university-based R&D, the Index spotlights the Illinois Institute of Technology’s (IIT) Interprofessional Projects Program (IPRO). As IIT has a larger proportion of its R&D funded by the private sector than both the state and national average, its model may be applicable for the rest of the Chicago region. In the IPRO program, private companies such as Motorola and the manufacturer A Finkl & Sons sponsor a team of students to tackle a real-world challenge facing the firms. Linking university curricula with industry needs enables private firms to see how their investment in academic research has direct relevance to improved business operations. This provides a stronger incentive to fund future research. A similar model fostering private investment in academic research tailored to specific and practical industry challenges could help insulate the region somewhat from any future declines in federal support.

In addition to diversifying funding sources through more industry collaboration, metropolitan Chicago should continue to build off its specializations so that the region has a strong innovation base independent of fluctuating funding streams. The Index’s most recent data on academic R&D points out regional specializations in life sciences and math/computer sciences. These technology-rich fields have broad cross-industry applications, with particular relevance for health care, information technology, and manufacturing. The region’s specializations both support a large swath of the regional economy and grant a competitive advantage compared to peer areas. As innovation funding streams continue to be pressured by budgetary concerns, the region should focus on sustaining and prioritizing capital and research investments in those very specializations that enhance our region’s competitive edge.

IDOT Releases FY 2014-19 Highway Program

2013-04-25T16:55:45Z

On April 17, 2013, the Illinois Department of Transportation (IDOT) released the FY 2014-19 Proposed Multimodal Transportation Improvement Program, its annual update of the five-year highway transportation program. As a component of that program, IDOT plans for $9.5 billion in highway spending over the next five years. According to IDOT, funding for the highway program will come from the following sources:

Click for larger image.
Note: “Pay-as-you-go” refers to revenue raised annually from the motor fuel tax, vehicle registration fees, and other sources. Pay-as-you-go revenues fund current spending. In contrast, the Illinois Jobs Now! capital program refers to bonds issued by the State. While those bond proceeds also finance current spending, they must be repaid over time with interest. Illinois Jobs Now! identifies a number of revenue sources to cover this debt service.

Comparing the current multiyear highway program to its two immediate predecessors, the FY 2012-17 program and the FY 2013-18 program, the current program demonstrates the increasing importance of federal revenues as the Jump Start and Illinois Jobs Now! state capital programs come to their conclusion. While these capital programs provided some 20 percent of funding in the FY 2012-17 program, they make up only six percent of the current FY 2014-19 program. Correspondingly, the federal share of the multiyear highway program has grown from 62 percent in the FY 2012-17 program to 71 percent in the FY 2013-18 program and now 76 percent in the FY 2014-19 program.

The FY 2014-19 program narrative does not provide a great deal of detail on its project evaluation and selection process, although it includes a more thorough description than previous multiyear highway programs. For example, the program includes a description of the Condition Rating Survey process for evaluating pavement conditions. However, the narrative does not specifically describe how IDOT’s various goals are weighted or how IDOT makes tradeoffs among competing goals. CMAP has called for a performance-based approach to project selection that explicitly links performance data to funding decisions.

IDOT District 1, which includes Cook, DuPage, Kane, Lake, McHenry, and Will Counties, is expected to receive $3,125,663,000 -- approximately 45 percent of the total $7 billion state highway program (the remaining $2.6 billion of the multiyear program is dedicated to local roads and streets). This share is consistent with the longstanding “55/45 Split,” a non-statutory agreement that directs only 45 percent of state highway funds to northeastern Illinois regardless of needs or system performance.

The FY 2014-19 highway program advances many projects identified in GO TO 2040, such as a new managed lane on I-55, the construction of an interchange between I-57 and I-294, improvements to the Circle Interchange, and the Elgin-O’Hare Western Access project. The highway program also includes the I-80 add lanes project, albeit with larger project boundaries than those identified in the GO TO 2040 plan. The FY 2014-19 highway program budgets $92.3 million for the Illiana Expressway project, including $21.3 million in FY 2014 for engineering and land acquisition. GO TO 2040 does not include the Illiana project as a fiscally constrained major capital project, although it does permit Phase I engineering to better define the project.

GO TO 2040 supports a sustainable, robust investment in our transportation system and the application of transparent performance-based criteria to prioritize projects. IDOT’s FY 2014-19 program emphasizes the waning resources of the most recent state capital programs, but does not fully describe the decision-making process that defined the evaluation and selection of projects for funding. CMAP believes these two issues should be front and center as decision-makers develop transportation policy for the state.

Revenue Shortfalls Jeopardize State Capital Program Financing

2013-05-02T14:22:23Z

Roughly once every ten years, the State of Illinois provides a capital funding package for transportation and other infrastructure projects. The most recent packages, Jump Start and Illinois Jobs Now!, were both enacted in 2009 and are often referred to as a “$31 billion” package to support investment in transportation, schools, and other public facilities. About half of that total consists of traditional pay-as-you-go federal and state resources, along with federal stimulus money from the American Recovery and Reinvestment Act. The other half of the package consists of bonds. Bond financing is particularly important for the transportation component of the program, which includes about $5.5 billion in bond authorizations or appropriations for state highways and bridges and about $4 billion in bond authorizations or appropriations for transit, rail, and aviation projects. The enabling legislation for Illinois Jobs Now! established a new Capital Projects Fund to cover debt service for the majority of the transportation bonds, with the revenues to be provided by new taxes and fees.

However, several of the new revenue sources, such as video gaming, have come up substantially below revenue projections. These sources were expected to generate about $1 billion annually but have only raised a little more than half that amount in recent years. Revenue shortfalls occurred for a number of reasons in part due to delayed implementation of video poker licensing until October 2012. In addition, many communities have passed local ordinances banning video poker games. The following table provides an overview of revenues by source.

Click for larger image.

This revenue shortfall jeopardizes the ability of the state capital program to fund projects. If balances are insufficient, the Capital Projects Fund’s enabling legislation provides for transfers from the Road Fund to cover debt service payments for bonds issued before January 1, 2012. The Road Fund provides pay-as-you-go funding for highway and bridge projects, as well as operational funding for the Illinois Department of Transportation. According to the Commission on Government Forecasting and Accountability, over $27 million in transfers were made between fiscal year (FY) 2010 and the first half of FY 2012. However, these transfers must be repaid from the Capital Projects Fund to the Road Fund when the monies become available. Since it is unclear when the Capital Projects Fund will meet its original revenue projections, attempting to meet obligations with transfers from the Road Fund may not be a viable strategy.

Data from the Illinois Comptroller provides a sense of how this shortfall in revenues has affected the State’s ability to issue bonds in support of Illinois Jobs Now! In Illinois, three bond funds support transportation investment: Transportation Series A for highways and bridges; Transportation Series B for transit, rail, and aviation; and Transportation Series D for roads and bridges. Debt service for Series A comes from the Road Fund, debt service for Series B comes from the General Fund (for Jump Start bonds) and new Capital Projects Fund (for Illinois Jobs Now! bonds), and debt service for Series D comes from the new Capital Projects Fund. The most recent data is available for FY 2011, with FY 2012 data expected to be released in June 2013.

Click for larger image.

As of June 2011, over 82 percent of the Transportation Series A bonds authorized by Jump Start for highways and bridges had been issued. In contrast, about 45 percent of the all Transportation Series B bonds authorized for transit, aviation, and rail -- including those from Jump Start and Illinois Jobs Now!, as well as previous capital programs -- had been issued. And about only 30 percent of the Transportation Series D bonds that Illinois Jobs Now! authorized for highways, local governments, and other transportation improvements had been issued.

Note that Illinois Jobs Now! was fully appropriated, but not fully authorized, in 2009. In other words, the Illinois General Assembly approved the overall level of spending for the program in 2009, but did not approve the full amount of bonds necessary to finance that spending. Those bond authorizations have been parceled out over the course of several years. Therefore, the high-level authorization figures do not match the total amounts appropriated under the program.

CMAP believes it is imperative for state policymakers to provide adequate financing for future state capital programs. GO TO 2040, the comprehensive regional plan for metropolitan Chicago, calls on the state to increase the motor fuel tax (MFT) by 8 cents per gallon and to index the MFT to inflation. The plan recognizes that gas taxes will eventually need to be replaced by more efficient user fees as more vehicles switch to fuel-efficient and alternative-fuel vehicles, but a short-term increase in the MFT would ensure adequate revenues for the next state capital program.

Springfield Snapshot, April 15-19, 2013

2013-04-19T16:24:18Z

With just seven weeks left in session, the Illinois General Assembly met again in Springfield this week. CMAP has been tracking over 350 bills this session, but only a fraction of those are still active. Friday, April 19 marks the next deadline for pending legislation in the Illinois House of Representatives -- bills that originated in the House must pass third-reading deadlines. On Wednesday, April 25, bills originating in Illinois Senate must pass a corresponding deadline. Bills that do not meet those deadlines require approved extensions from House and Senate leadership to advance through the legislative process. The following Policy Update discusses action from the week of April 15-19.

State Budget
This week, both chambers convened committees to consider proposed Fiscal Year 2014 budget allocations for the state’s numerous departments and institutions. On Wednesday, the Illinois House Appropriations Public Safety Committee met to discuss the proposed budget appropriations for the Illinois Department of Transportation (IDOT) and the Illinois State Toll Highway Authority. The Illinois House Appropriations General Services Committee also met on Wednesday to discuss the Illinois Department of Natural Resources (IDNR) budget. On Thursday, the Illinois Senate Appropriations II committee discussed IDNR’s budget proposal.

2014-19 Multi-Year Transportation Program
The Governor and IDOT released its multi-year program this week, totaling nearly $12.62 billion in capital construction over five years. The program includes major projects, such as the Circle Interchange and the Illiana Expressway, as well as maintenance on existing infrastructure. CMAP will provide a more detailed review of this proposal in an upcoming Policy Updates blog.

Other Bills Acted on This Week
RTA Board Benefits Elimination (HB 140) eliminates compensation and pension benefits for RTA board members. Status: Arrived in the Senate and awaits assignment.

Water and Sewer Utilities Value (HB1379) provides an alternative procedure that a large public utility may choose in establishing the ratemaking base of water or sewer utility that the large public utility is acquiring. Status: Passed out of House.

RTA Issuance of Bonds (HB 1389) extends the deadline for the RTA to sell additional Working Cash Notes that are over and above and in addition to the $100 million authorization to July 1, 2016 from its current deadline of 2014. Status: Assigned to Senate Transportation Committee.

Stormwater Management (HB 1522) allows DuPage and Peoria Counties to impose user fees for stormwater management. Status: Sitting third reading in the Senate. CMAP supports this legislation.

Road Fund-No Transfers (SB 29) prohibits sweeps of funds intended for roads or mass transit. Status: Assigned to Senate Subcommittee on Special Issues.

Counties Affordable Housing (SB 1244) establishes an Affordable Housing Trust Fund pilot program in Lake County. The legislation also gives Lake County the authority to impose a $3 recording fee on real estate transactions to be deposited in a trust fund. Status: Sitting third reading in the Senate. CMAP supports this legislation.

Township - Singular Dissolution (SB1585) provides a process by which a single township within a county under township organization could dissolve. Amendments limit the provisions to townships within a coterminous, or substantially coterminous, municipality in which the City Council exercises the powers and duties of the township board, or in which one or more municipal officials serve as an officer or trustee of the township. Status: Arrived in the House.

Transportation Design-Build (SB 1647) creates a demonstration program for design-build (DB) and construction manager/general contractor (CM/GC) project delivery approaches. The bill allows IDOT to enter into as many as five DB contracts and five CM/GC contracts. The Act allows IDOT greater flexibility in delivering projects and achieving cost and time savings. Status: Senate Committee deadline extended to April 19, 2013.

White House Releases FY 2014 Budget Proposal

2013-04-19T13:18:24Z

On April 10, 2013, President Obama released his budget proposal for federal Fiscal Year (FY) 2014. Over the next ten years, the budget would increase revenues by about $1.1 trillion and cut ten-year spending by $265 billion, thereby reducing the federal deficit by $1.3 trillion compared to the Office of Management and Budget’s (OMB) baseline projections. CMAP is monitoring the development of the FY 2014 budget because federal investments and policy in transportation, economic development, and housing play a vital role in the implementation of GO TO 2040.

Transportation
The requested U.S. Department of Transportation (U.S. DOT) budget is $77 billion, with an additional upfront request of $50 billion in immediate investments to support economic growth. Of the immediate requested investments, $40 billion would fund a “fix-it-first” maintenance program for highways, transit, rail, and airports. The remaining $10 billion would fund competitive grant programs. The budget proposal emphasizes infrastructure financing, calling for a national infrastructure bank and an America Fast Forward bond program. Unlike traditional grant-funded programs, these low-cost financing tools would be repaid by local jurisdictions. U.S. DOT and the OMB have additional information on FY 2014 budget estimates by transportation agency on-line.

The ten-year budget fully implements Moving Ahead for Progress in the 21^st Century (MAP-21) and assumes a six-year successor bill to MAP-21 starting in FY 2015; such a bill would add a total of $88.5 billion in additional spending above the baseline estimates. The ten-year budget also plans for a robust Amtrak reauthorization bill, with over $40 billion for railroads between FY 2014-18. However, the budget does not continue that level of rail investment after FY 2018, nor does it provide for a second successor bill to MAP-21 after FY 2020. As such, the total expenditures for surface transportation drop from about $81 billion in FY 2020 to about $55 billion in FY 2021.

Workforce and Economic Development
The requested U.S. Department of Commerce (DOC) budget is $8.6 billion. Within DOC, the Economic Development Authority (EDA) has been charged with strengthening manufacturing through a multifaceted initiative that includes investing in economic development and spurring technological innovation. A new program in the proposed budget, modeled after Germany’s Fraunhofer Institutes, would invest $1 billion to expand research and development (R&D) through regional manufacturing institutes. While R&D investment as a share of the regional economy increased in other U.S. metropolitan areas over the past decade, it declined in northeastern Illinois during the same time period.

The federal budget would also allocate $113 million to create an “Investing in Manufacturing Communities” fund, which would support regional strategies that build on specializations and leverage private-sector resources. The proposed budget also includes numerous other programs to support manufacturing, such as export assistance and cyber security to protect intellectual property.

The budget also proposes targeted investments for workforce development through numerous programs administered by the U.S. Department of Labor (DOL) and U.S. Department of Education (DOE). The budget proposes an $80 million increase for Workforce Investment Act formula grants, with an additional $25 million to support evidence-informed efforts to improve employment outcomes for older Americans. DOL and DOE have also requested $8 billion to jointly administer a Community College to Career fund. This fund would build partnerships between community colleges and industries to address the current skills gap between available jobs and the abilities of the existing labor force.

In addition to direct programmatic investments, the budget also proposes tax credits to spur economic development. The proposed budget would make some tax credits permanent, such as the research tax credit. The budget would also make the New Markets Tax Credit (NMTC) permanent. Created in 2000, the NMTC is used to attract capital to economically distressed rural and urban communities. The program has been used in the Chicago region to spur investment in manufacturing and industrial areas.

Housing
The requested U.S. Department of Housing and Urban Development (HUD) budget is $47.6 billion, representing a 9.7-percent increase above the level enacted in 2012. HUD estimates that over 90 percent of the increase will maintain the existing levels of assistance to rental housing and homeless families. As part of a newly-created created Promise Zones program, the budget would substantially increase funding to the Choice Neighborhoods program, which provides assistance to neighborhoods with distressed public or public-assisted housing. Building on the Neighborhood Stabilization Program, a proposed Neighborhood Stabilization Initiative would provide $200 million to help communities address vacant and/or foreclosed properties. In turn, the budget would reduce funding available for Community Development Block Grants (CDBG) and the HOME Investment Partnerships program. The CDBG program provides formula-based assistance for eligible communities to spend on neighborhood revitalization, economic development, and improved services. The HOME program provides funds for affordable housing development.

The proposed HUD budget also represents a significant restructuring or rebranding of key programs. The expiring Partnership for Sustainable Communities grant program would be replaced, pending approval of the budget, by a partnership between U.S. DOT, the U.S. Environmental Protection Agency, and HUD via a new Office of Economic Resilience. This partnership would be responsible for administering $75 million in Integrated Planning and Investment Grants. These grants would assist communities in developing and implementing comprehensive housing and transportation plans through initiatives such as building code updates and land use and zoning ordinances that result in more resilient economic development. Additionally, the new Promise Zones program would link existing initiatives, creating a new partnership between HUD, the U.S. Department of Justice (DOJ), and DOE to provide targeted assistance to high-poverty communities. In addition to HUD’s proposed $400 million in Choice Neighborhoods grants, DOJ and DOE would receive $35 million and $300 million for companion Promise Zone initiatives, respectively. The program would provide targeted assistance to 20 competitively-selected communities.

FY 2014 Budget Proposals and GO TO 2040
Overall, the President’s budget proposal is consistent with the policy direction of GO TO 2040. Many of its proposals would help to ensure an adequate level of investment in our transportation system, support the maintenance and modernization of the existing system, and promote competitive, merit-based funding programs. The proposal takes a regional, cluster-based approach to support economic development that aligns well with several of GO TO 2040’s recommendations. These recommendations seek to foster innovation through the nurturing of industry clusters, creating a culture of innovation, and increasing commercialization of research. The budget proposal’s heavy emphasis on manufacturing could support the region’s economic development given that metropolitan Chicago is home to the nation’s second largest manufacturing cluster. The proposal would also expand small firms’ access to R&D, a need identified in CMAP’s manufacturing cluster drill-down report.

The proposed budget continues to emphasize cross-agency collaboration to address the often inter-connected problems and solutions found when creating sustainable, livable communities. Both the Office of Economic Resilience and the Promise Zones program would encourage federal agencies to work in a coordinated manner to implement plans or assist communities in meeting critical sustainability and revitalization goals. Additionally, the implementation focus of the Office of Economic Resilience aligns directly with GO TO 2040 recommendations to link investments to comprehensive planning.

Despite these positive aspects of the President’s budget proposal, CMAP is concerned that the budget does not provide an adequate funding source for the level of transportation investment it proposes. GO TO 2040 calls on policymakers to increase the federal motor fuel tax and index it to inflation, as well as to pursue a long-term replacement for the gas tax. The President’s budget proposal makes no progress on either of these recommendations, and instead relies on the so-called “peace dividend” from winding down military spending in Iraq and Afghanistan to finance its transportation proposals. Additionally, the budget reduces funding for affordable housing development (HOMES) and community revitalization and economic development (CDBG) funds. GO TO 2040 calls for communities throughout the region to provide housing options for all residents, and reductions in these funding sources exacerbates already-limited resources for affordable housing development.

CMAP encourages federal policymakers to consider its federal agenda for 2013 as they craft a budget for the new fiscal year beginning this October.

CDOT Releases Complete Streets Design Guidelines

2013-04-18T19:57:20Z

On April 13, 2013, the Chicago Department of Transportation (CDOT) released its new Complete Streets Design Guidelines. The “complete streets” movement emphasizes designing roadways for use by all modes, including transit, bicycle, and pedestrian.

The guidelines contain four key themes to institutionalize complete streets into CDOT’s activities. The first theme establishes a “modal hierarchy,” through which CDOT will first prioritize the needs of pedestrians, followed by transit riders, then bicyclists, and, lastly, drivers. The second theme classifies various “typologies” for the city’s streets based on land uses, right-of-way width, and other factors. The third theme provides design guidance based on the modal hierarchy and the forms and functions of a roadway and its land use context. The “design values” recommend target, maximum, and constrained widths for the various components of a roadway’s cross-section, and it also recommends different design approaches for intersections and other roadway geometrics, along with operational policies. Fourth, the guidance reviews CDOT’s internal procedures for project selection, scoping, design, construction, measurement, and maintenance, and recommends how they may be updated to promote complete streets.

GO TO 2040 supports an inclusive, multimodal approach for transportation policy and explicitly supports complete streets principles. The Complete Streets Design Guidelines build on CDOT’s past work, including the Chicago Forward action agenda, the Streets for Cycling Plan 2020, and the Chicago Pedestrian Plan.