Amazon’s Race to the Bottom Puts Chicago Transit at Risk

(Sipa via AP Images)

A CTA train in Chicago

Transit has emerged as a key issue in the furious competition between municipalities to land Amazon’s second headquarters. With the company placing a premium on access to rail and bus networks, cities like Chicago put transit front and center in their applications. If you look at their proposal, Amazon’s, and you look at what they’re looking for: talent, transportation, training, technology,” Mayor Rahm Emanuel declared as the city its unveiled its formal bid last September. “Who [else] will have a transportation system, both public and aviation, that will give them the capacity to get everywhere in the world and get their workers to work conveniently?”

Lost in the discussion to lure Amazon to Chicago are the deep inequities within the city’s existing transit system, fault lines that threaten to leave entire neighborhoods behind should Amazon choose Chicago for its second home base. If overlooking those disparities weren’t short-sighted enough, Chicago’s bid also promises $ 450 million in new transit projects, funds that neither the city, Chicago Transit Authority, nor the state of Illinois have.

Should Chicago reel in Amazon’s HQ2, those projects, included in a $ 2.25 billion package of tax breaks and other public investments, may drain already strained public coffers, and affect the city’s ability to ensure that the opportunities Amazon promises are evenly distributed.

“It’s like a deal with the devil,” says Robert Paaswell, the transit authority’s executive director. “The CTA already is hurting because the city and state can’t live up to obligations right now, even without these tax breaks. It’s like I’m going to sell my first-born so I can have Amazon come here.”

Footing that bill for new projects would hit the CTA particularly hard. The authority already faces a $ 33 million deficit following a 10 percent reduction in state funding in the 2018 budget. On top of that, the agency needs to spend $ 13 billion just to bring existing infrastructure up to date. To address the short-term deficit, city officials hiked CTA fares 25 cents in January, a move advocates say will likely hurt already-dwindling ridership.

In the long term, the CTA’s financial health is much less certain. “We’re constantly on the edge of this spiral of increasing fares or cutting service,” says Kyle Whitehead, the government relations officer at the Chicago-based Active Transportation Alliance. “We should be talking about upgrading or expanding service, but we’re constantly on defense trying to maintain existing operations.”

Despite these budget woes, the city’s $ 2.25 billion Amazon incentive package includes a $ 173 million cut in state sales taxes—the CTA’s primary revenue source. “This is a bad year to offer a sales tax break,” says Scott Bernstein, founder and chief strategy officer at the Center for Neighborhood Technology. He adds that the agency may need to either raise fares again or cut service to make up the difference. “The CTA depends heavily on sales taxes: If costs go up, the poor will pay more, and a disproportionate share of riders will shoulder that cost,” he says.

The current fixation on Amazon overshadows transportation disparities elsewhere in the city. In mid-February, CTA officials held a public forum on long-awaited rail expansion to Chicago’s Far South Side. In the works for nearly five decades, the proposed 5.3-mile project, would carry the Red Line of the Chicago L (as the rapid transit system is known locally) to 130th Street, dramatically improving transit options for more than 120,000 city residents, the vast majority of them African American.

Riverdale, a neighborhood where poverty and a lack of transit are synonymous, lies at the far south end of that project. Once a center of heavy industry and manufacturing, today the community is a patchwork of abandoned factories and polluted rivers. With the neighborhood cut off from the city’s growing economy,  residents have fled the area in droves.

Currently served by just a few direct bus lines, Riverdale lies some 20 miles south of the downtown Loop neighborhood—which by transit takes about 75 minutes to traverse using two buses, a commuter train, and walking more than 25 minutes. Such long commute times (the second-highest in Chicago) contribute to the neighborhood’s soaring unemployment rate of 40 percent, more than five times the city average.

Yet despite this transformative potential, the new line may still be a long way off. The $ 2.3 billion expansion depends on securing at least $ 1 billion in federal funding, an investment advocates say is increasingly unlikely as President Trump’s Department of Transportation shifts dollars away from public transit. The CTA also faces a steep $ 76 million cut in state funding, and is already struggling to find the billions it needs to bring existing infrastructure into good repair. So, while privately funded projects like Elon Musk’s high-speed rail tunnel to O’Hare appear to be moving forward, projects like the Red Line expansion may never see the light of day.  

Yet it is unlikely that such investments, even if it the CTA could fund them, would go toward expanding rail to a place like Riverdale. Future infusions of funding would likely go toward improving access to one of the ten sites city leaders have proposed for the Amazon headquarters.

With most of the proposed sites near existing rail lines, such investments would likely go toward connecting the new headquarters to the CTA network, says Bernstein. One of the more promising locations for HQ2 is the site of a former A. Finkl & Sons steel plant in the North Side neighborhood of Lincoln Park. Local developer Sterling Bay owns the 100-acre site, dubbed Lincoln Yards, situated along the Chicago River’s northern branch. The developer has pledged a massive $ 10 million investment should Amazon decide to set up shop there. Plans for the area include a soccer stadium, concert venue, and riverwalk. A Sun-Times reporter spotted Amazon officials touring the site late last year. 

Like most other proposed sites in Chicago, Lincoln Yards lies near several rail and bus lines. According to a comprehensive transit quality study by the Center for Neighborhood Technology (CNT) released in January, 100 percent of households and jobs in the census tract surrounding Lincoln Yards are within a half-mile of high-frequency transit (compared with 56 percent of jobs and 53 percent of households in Cook County as a whole).

City transit officials would like to zero in on the “last-mile problem” in these areas,  devising new links to connect the site to existing bus and rail lines. Amazon faced a similar issue when the firm relocated to Seattle’s South Lake Union neighborhood in 2007. To increase service around the then–largely uninhabited corner of Seattle, Amazon purchased one of the city’s streetcar lines and began running service every 10 minutes. Unlike the Seattle project, however, the city of Chicago may end up footing the bill with financial assistance from the company.

Such proximity to transit is typical for almost all of Chicago’s proposed sites, which also include the River District and Fulton Market on the North Side; the Illinois Medical Center on the West Side; City Center Campus, the Gateway District, and the 78, a site near downtown; the Burnham Lakefront on the South Side; and two suburban sites in Oak Brook and Schaumberg.

According to the CNT study, transit service, including factors like the level of transit coverage in a neighborhood, economic opportunities near bus and rail stops, and frequency of service, actually exceeds the demands of the local market at eight out of the ten proposed sites. All of these proposed headquarters sites offer far better transit access than places like Riverdale.

Long after the HQ2 question gets settled, expanding transit access for Riverdale and the rest of the city, will likely remain on the backburner as Chicago continues to prioritize modernization and upkeep. In a recent New York Times op-ed, “In Chicago, the Trains Actually Run on Time,” Emanuel touted this approach as a key to the CTA’s high ridership and reliable service. “How have we done it? First, we put reliability ahead of expansion,” he added, describing plans to rebuild four out of the CTA’s seven rail lines, along with four out of every ten stations. “As we have seen in Chicago, mass transit not only connects people to opportunities, it also fuels growth,” he added.

(Daniel X. O’Neil/Flickr)

Rahm Emanuel announces his candidacy for Chicago mayor in 2010.

But Emanuel chose to ignore the existing disparities in the CTA system: In Cook County alone, which encompasses Chicago and many nearby suburbs, some 500,000 people, one out of every ten residents, lack adequate access to public transit, according to the CNT study. Similar patterns exist in Riverdale and other neighborhoods across the city, according to the University of Chicago’s Poverty Lab. In nearby Burnside, Pullman, and Chatham, long commute times and extreme levels of poverty are deeply intertwined. These Far South Side communities, long cut off from Chicago transit, would benefit greatly from the employment and other economic development opportunities that would follow Red Line expansion.

Meanwhile, as higher housing costs have pushed low-income residents farther out into the suburbs, the CTA system has not kept up with demand. Currently, in the metropolitan area, 70 percent of households and 68 percent of jobs are a half-mile or more away from high-frequency transit. If Amazon decides to move to Chicago, cost of living increases could well push more low-income people into areas with little to no transit access. “Lower income people will have longer journeys to commute, they’ll be paying more in travel time, and be driven further and further out,” says Paaswell.

The massive corporate welfare package Chicago leaders have cobbled together may be unprecedented in the city’s history, but it’s hardly unique among municipalities seeking Amazon’s favor. Along with billions in tax breaks and land giveaways, municipal leaders nationwide have made it clear that almost any public asset can be monetized in the quest to land HQ2.

Such an aggressive race to the bottom recently prompted more than 600 leading economists and transportation experts to call on city officials “to forge and sign a mutual non-aggression pact that rejects such egregious tax giveaways and direct monetary incentives for the Amazon headquarters.”

The experts, which include University of Toronto professor Richard Florida and former Council of Economic Advisers Chairman Alan Krueger, warn that massive tax breaks “divert funds that could be put to better use underwriting public services such as schools, housing programs, job training, and transportation, which are more effective ways to spur economic development.”

That warning echoes research by University of Texas professor Nathan M. Jensen, who recently found that in roughly two-thirds of cases, city and state-level incentives go to corporations that were already planning on moving there anyway. As Brookings researcher Richard Shearer recently argued, “There’s a very good chance Amazon already knows exactly where it would like to open its second headquarters,” adding that the ruse of a competition “is a way of inviting the place it has already chosen to foot the bill for Amazon’s new digs.”

For cities like Chicago, the risks of pledging too many public resources like transit for too little public benefit are high. Instead of offering deeper tax breaks and incentives, Chicago leaders should ask Amazon itself to make investments in transportation and other sectors that will benefit the company, its employees, and  the entire region’s residents. “If you’re talking about public goods like transit, it’s not a matter of just how a company benefits from transaction. It’s a matter of community benefits,” says CNT’s Bernstein. “Cities have been missing an opportunity to reframe these competitions as something that could be more beneficial.”

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