Does Your Commute Suck? Blame Kankakee

Kankakee, IL 1869 [SnapShotofthePast]

The Regional Transit Authority and City of Chicago followed through on threats to sue a pair of northeastern Illinois towns accused of illegally siphoning off tax revenues. What? Financial funny business in Illinois? Yeah, not really a shocker, but the dollars involved are: the RTA is going to court to reclaim $100 million.

The City and RTA contend that Kankakee and Channahon courted major corporations doing business in Chicago with a kickback scheme that involved shaving 85% of the town’s share of tax dollars. In return, companies set up small offices in the towns where merchandise orders could be accepted (giving the remaining tax dollars to Kankakee and Channahon, rather than Chicago, where the merchandise was expected to be sold and those tax dollars would normally go).

We know that the typical Chicagoista isn’t exactly in the Crain’s Chicago Business target demo, so you may not have noticed that Greg Hinz has been all over this story since last spring. This week, he added some interesting context to the Trib’s splashy story last weekend, including this nugget showing just how lucrative the arrangement has been for the small towns:

“The scheme was so profitable that Kankakee and Channahon now lead the state in annual retail sales per capita at $78,000 and $62,000 respectively, the suit contends -- ten times the per capital sales of Chicago and roughly double that of towns with large retail shopping malls.”

He also has this not-so-veiled threat from a lawyer representing some of the companies embroiled in the mess that gives a taste of how ugly this could get:

“In fact, the companies involved (some of whom are members of the coalition) will not move to Cook County if they lose the suit, but instead flee the state entirely, [FACTS coalition attorney Stan] Kaminski says. "Obviously, this will also mean less jobs, property taxes, use taxes and other taxes and fees" for Illinois and its municipalities.”

Nice shaky economy you got there Chicago. It would be a shame if somebody did something to break it…

So, why should you care? Well, dear reader, do you take public transportation? Since the towns are just outside of RTA’s territory, this scheme diverts a massive chunk of change from the sales tax revenues that make up about half of the Authoirty’s subsidies to CTA, Metra and Pace. Think about that $100 million next time we hear about potential service cuts, fare increases or a lack of resources for transit infrastructure and new offerings like bus rapid transit in the City That Works.

Contact the author of this article or email tips@chicagoist.com with further questions, comments or tips.

By JoshMogerman in News on August 27, 2011 3:00 PM

Comments [rss]

Miles Robinson

Can anyone give details as to why what these cities did was illegal? It sounds like all they've done is offer a lesser tax burden on some companies if they move there. The problem seems not to be the actions of the municipalities, but rather the incentives of the tax system. There will always be attempts to steal business from your neighbor if simply moving into another building is all that is required to change who gets the tax revenues. Maybe revenues should be dependent on where the item is sold rather than where the sales office is located.

Harry

What? Channahon caught is some questionable acts? I'm shocked to here this. Absolutely shocked (I say as the mayor is under federal investigation for other alleged activities).

tomdarch

I love how companies threaten to leave states like Illinois (or flee Chicago for "downstate") because they'll pay even less in taxes. The irony is that the Chicago metro area (aka "The RTA service area") drives not only the entire economy of Illinois, but the economy of the multi-state region.

On top of that, Illinois pays more into the federal government in revenue and taxes than the state gets back in federal spending. Those "low tax" states that these companies want to flee to? They receive more in federal spending than they pay into the system. In other words, we pay for their welfare checks.

If the Tea Party brand of the Republican party wants me to take them at all seriously, they can propose a federal law that limits federal spending in each state to the amount that the state pays in, thus stopping the current situation where IL, NY and CA subsidize all the "get the gubmint off my back!" states. See how long those states can keep up their "pro-bidnis" low taxes without our subsidies via the federal government.

(The other irony of "lets flee to where the grass is greener" is that after WWII, a bunch of manufacturing fled Chicago for the burbs. It didn't go as expected. In the city, their lower paid employees could use the subsidized public transit system to get to work. Out in the burbs, they found that they had to pay employees enough to afford cars.... Oooops!)

Navin_Johnson

It's sad watching all these idiots fight to be last in the race to the bottom. This is so obviously stupid and unsustainable. What happens when every state has basically given everything away to big business? There's always some third world-ish state or country lining up to be the next bottom of the barrel. It's always funnier in Illinois too, what with our flat tax rate. The CEO of Caterpillar pays the same as you or I...

Mimihaha

I don't understand people who are anti-transit. Do you really want each of us in our own car, all trying to get to the same place you are going at the same time you are going there?

I pay for your roads. You can pay for my rail.

slatsg

Socialist!!

Mimihaha

Yes, I am a socialist. Do you have any idea what the word means?

Batman1234

Proof that Chicago's sales taxes are too high, not that collar counties' taxes are too low. It's a fact of life that people will avoid paying for things that they don't have to or want to pay for. The RTA is one of those things. Public transportation is nice, but it would be abandoned overnight if your average Chicagoan knew the true cost per ride.

Navin_Johnson

CTA service has declined by something like 20% yet despite that, the ridership remains basically steady, so I doubt that very much.

ReverendSlappy

One of the more pitifully inept attempts at trolling I've seen on this site or elsewhere.

People this fucking stupid are why Ron Paul has a job.

slatsg

Piss off, dumbass!

Ed Crotty

Throw these scammers in Jail. Let those mayors do time in orange jumpsuits @MCC. And the CEO's as well.

jmogs

Hmmm, most studies show public transit as cheaper than owning a car in urban areas. And there have been very interesting studies showing homes close to public transit have been (and continue to be) less likely to be foreclosed upon because of the ability to shuck automobile associated debt:
http://www.wired.com/autopia/2...

Batman1234

Most studies show the exact opposite. Which is why public transportation systems need heavy subsidies to remain operational.

Navin_Johnson

Myth busters: Transit subsidies
The myth: The federal government heavily subsidizes mass transit, while driving pays for itself through the gas tax.

The reality: For the gas tax to pay for highways (not even local roads), it would have to be on the order of a dollar per gallon. The tax is just 18.4 cents a gallon. That's a federal subsidy of about 80 cents per gallon of gas used on the highway.

Indeed, a new analysis by Subsidyscope, a joint project of Pew Charitable Trusts and the Sunlight Foundation, found that last year highways got $30 billion in subsidies while transit got just $9 billion. (H/T Streetsblog)

The government turned away $1.5 billion, in the form of tax breaks, on parking alone, a sixth of its total subsidy on transit. (Perversely, parking accounts for the largest single share of driving-related subsidies.)

Looked at in terms of your own wallet, a taxpayer is eligible for just over $200 in employment-related tax-free parking for month and less than $100 in such transit costs.

Also consider this: Each dollar in subsidy directed at driving has two effects that, unlike chocolate and peanut butter, don't go well together: (1) increasing driving, which costs the government money and makes driving less efficient (i.e., more congested), and (2) by making driving unrealistically cheap, subsidies force transit systems to lower prices in order to retain ridership, which keeps them strapped and sub-par.

That situation has a name: It's the status quo.

Read more: http://www.sfgate.com/cgi-bin/...

JoeChicago

Really? Because the road you drive your car on isn't subsidized by the taxes you pay? There are very few road systems that are successfully privately run operations in the US.

jmogs

Let's see some, that would be interesting.

Navin_Johnson

BATMAN1234 = obvious troll is obvious.

BlueFairlane

Any idea what the true cost per mile is of driving? Probably not.

Batman1234

Any idea that the true cost of driving is spread across lots of road uses including public transportation, personal auto commutes, and shipping of goods. You think your groceries came on a bus?

BlueFairlane

They might come on a train. But what's that have to do with anything? Even including all uses of highways, you don't pay anything near the true cost of driving. From subsidized road construction and maintenance to the subsidized petroleum infrastructure, you don't pay anything close to it.

slatsg

Dude, waste of time.
Easier to tell him to just "piss off dumbass!" Here, watch me (look up).

High_n_Dry

"... Abandoned overnight..." Yeah then everyone would get in their car, oh wait, about a million people in Chicago alone do not own a vehicle.