A Loan Fund Aims to Spur Development Along a Midwest Commuter Rail Line

As Leah Konrady sees it, there’s lots of untapped potential for growth and revitalization in the Northwest Indiana towns along the South Shore Line—the roughly 90-mile commuter rail that hugs the edge of Lake Michigan and connects the region with Chicago.

With this in mind, Konrady, who heads a nonprofit focused on economic development in three Northwest Indiana counties, has worked with local bankers and other community leaders to launch a new $25 million fund to help finance projects near stops on the line.

Indiana cities such as Hammond, Gary and Michigan City are among those places.

Projects within a quarter mile of rail stops, with ground floor retail and dense housing are some of those that are slated to be priority investments for financing through the program.

"We really see these downtown areas as very attractive to people of all ages," Konrady said. "It's been interesting to me that we have this commuter rail line, where we have zero transit-oriented development.”

“We've had the rail line for 100 years,” she added. “We've kind of just left ourselves in the dust.”

In general, the fortunes of Northwest Indiana cities followed an arc during the 20th century that is familiar to other parts of the Midwest and Northeast. Populations swelled during the first half of the century, then receded as industries eroded and people moved to the suburbs. 

But Konrady describes a situation today where planned upgrades on the South Shore Line promise to shorten train commute times between cities the railroad serves and downtown Chicago.

The Northern Indiana Commuter Transportation District, which operates the commuter rail, has two significant projects in the works.

One would add a second track and make other improvements between between Gary and Michigan City. The other, known as the West Lake Corridor Project, would involve building a new eight mile southern branch off the line, between Hammond and Dyer, Indiana.

Konrady explained that the double track project is expected to cut the time it takes to get to Chicago by train from Michigan City from nearly two hours to one hour, if NICTD runs express trains. The time it takes to drive, she said, is about an hour and 20 minutes.

“That puts Michigan City really on the map,” she said.

The South Shore Line travels between Chicago's Millennium Station and the South Bend International Airport. The train line's Michigan City stops are some of the furthest to the east, before South Bend.

But while the rail projects could be a big deal for the region, developers and lenders might still be reluctant to view cities there as ripe for new residential or commercial construction. 

As it stands, population growth and incomes in the area tend to be somewhat lackluster. The rail upgrades aren’t completed, and even if they are it’s uncertain when, if ever, more people living in and around Chicago will warm up to the idea of moving to the corridor. 

"A developer would say: 'This isn't a high performing market. It's going to be hard to build market rate housing,” Konrady said.

This dilemma ties back directly to the mission of One Region, the nonprofit that Konrady leads. The group is focused on finding ways to encourage population growth, attract and retain talent, and increase household income in cities in Northwest Indiana.

Konrady herself grew up in the Michigan City area, and returned to Northwest Indiana after living in other parts of the U.S. She took her current job in mid-2016. In the course of her work, she started looking around for cities that have had recent economic rebounds.

Places like Asbury Park, New Jersey, Pittsburgh and Denver.

Over the past couple of years, Konrady and other local community and business leaders, including bankers, traveled to these cities. She said in January the group decided to concentrate their efforts in Indiana on investments in transit oriented development.

“We need to incentivize a way to create these higher density, walkable areas, connected to our transit,” Konrady said.

The idea for the loan fund began taking shape during discussions local leaders had in June while they were in Denver. Both local government officials and bankers were on hand as the conversation delved into what assistance cities needed and how banks might help. 

One banker suggested a loan program where each bank would commit $1 million to help finance real estate projects, another upped the amount to $5 million. “That was the start of it,” Konrady recalled. “It kind of just started to set the wheels in motion.” 

Five banks have signed onto the lending program at the $5 million level. The initiative was launched through the Northwest Indiana Regional Opportunities Council, an affiliate of One Region, whose members include over 20 area CEOs and business executives. 

"It's a way to spread the risk among the five banks in these areas that we know are higher risk because the market's just currently not there,” Konrady said. “But we all believe that it will be there.”

For now, the program remains in its early stages, without any projects teed up. It will be left to the bankers to decide how to dole out the financing. But the Opportunities Council has identified some rough guidelines for potential investments.

In most cases, Konrady noted, it’s unlikely financing from the fund will be enough for an entire project. Instead it would be part of a broader stack of capital, which might include public subsidies—like tax credits, or investments through the federal Opportunity Zones program.

The guidelines call for financing from the fund for individual projects to be capped at $5 million.

With its planned upgrades, the commuter rail may be a major asset for the region. But in Konrady’s view “having the tracks is not enough.”

“You have to activate that system,” she said. The loan program, Konrady said, is a step toward that goal. “We know that this fund is not the entire solution,” she added. “But it's the start of the solution. And it's the start of getting the private sector to the table."