"Today’s approval is great news for CTA customers, as we move forward with one of the biggest modernization projects in CTA history,” said Chicago Transit Authority President Dorval R. Carter, Jr.

CHICAGO – The Chicago City Council signed off Wednesday on a new special use tax-increment financing district designed to help leverage $1.1 billion in federal funding for rail transit improvements.

The council acted during a special meeting that allows the Chicago Transit Authority to meet a Wednesday deadline to apply for a Federal Transit Administration core capacity program grant. In its application, the CTA needs to show it can match the $1.1 billion being sought.

"Today's approval is great news for CTA customers, as we move forward with one of the biggest modernization projects in CTA history," CTA President Dorval R. Carter, Jr. said in a statement. "This investment will ensure that the Red Line continues to serve as the backbone of the CTA rail system."

Chicago Mayor Rahm Emanuel and the CTA want the grant considered before President Obama leaves office. The city has benefitted from numerous federal funding programs including grants and Transportation Infrastructure Finance and Innovation Act loans over the last eight years. Obama is a former Illinois senator and Emanuel was his first chief of staff. Carter is a former federal transit official.

The TIF would account for $622 million of the matching share. The CTA hopes to win a federal loan it would repay with the TIF revenue at a total estimated cost of $823 million through 2033. The TIF is expected to generate $851 million over that term. If it's forced to borrow on its own, the CTA's debt service schedule would be extended. The remaining $428 million of matching funds would come from CTA bonding.

The TIF will run along six miles of the elevated Red Line tracks on the city's north side. While some council members have been critical of city TIF practices because of past favoritism shown to downtown projects and the diversion of funds that could benefit schools, the City Council unanimously approved the district.

Council approval followed state passage of state legislation in June – which Gov. Bruce Rauner signed in August -- that paved the way for a transit-only TIF district. Typically under state TIF rules, property taxes are frozen in a new district and tax growth is diverted to fund general improvements.

In the transit TIF, Chicago Public Schools will continue to receive its share of revenue growth while the CTA receives 80% of the remainder and other taxing bodies receive 20%.

The new TIF, which is the largest in the city's history, could run for up to 35 years instead of the standard 23.

The combined local funds, bonding, and federal help would finance the first phase of costs to renovate two major CTA train lines, a project known as the Red and Purple Modernization Program. The overall plan calls for the reconstruction of the 100-year-old Red Line, the CTA's busiest.

The first phase includes plans to rebuild four stations and more than a mile of tracks and track structure and build a bypass allowing trains to avoid a busy junction of two lines.

The CTA previously completed the $425 million reconstruction of a portion the Red Line and last week committed $75 million in bond funds for planning and engineering costs on a proposed $2.3 billion 5.3 mile Red Line extension. Construction of a new $280 million 95th Street Terminal and a $203 million transfer station, both for the Red Line, is ongoing.

"This is something we should be proud of," Emanuel told aldermen after the vote.

Faced with massive maintenance and renovation needs, the CTA has increasingly relied on its own borrowing by leveraging federal grants and its share of sales taxes to offset dwindling state funds. The CTA's parent, the Regional Transportation Authority of Illinois, has largely tapped its bonding authorization.

The proposed TIF as well as the CTA's proposed $1.52 billion 2017 budget won the Civic Federation of Chicago's endorsement.

The budget holds base fares flat and continues to make strategic capital investments despite ongoing state funding uncertainty, the report said. The budget is structurally balanced and manages to avoid service cuts despite declining fare revenue.

"Rather than increase fares, cut service or resort to the use of shaky financial practices to respond to decreased fare revenue, the CTA has presented a sensible, measured plan that prudently manages expenses and leverages non-fare revenues to make important investments in the system," said federation president Laurence Msall.

The federation endorsed the TIF as a means to leverage the federal funds although it has concerns about putting transit needs on the property tax base. The federation also remains concerned over the CTA's substantial funding gap, the long-term stability of its pension fund, and what it considers CTA's overly optimistic state-funding projections amid the ongoing Illinois budget impasse. Rauner has previously proposed transit funding cuts.

As part of its recent budget approval, the transit agency approved a $3.5 billion five-year capital budget for 2017-2021.

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