Despite Bankruptcy, Momentum in Motown Builds for Streetcar

The high-profile light-rail project will link Detroit's two most vibrant sections. Financing for the $131 million line includes a huge amount of private and philanthropic support.
by | July 17, 2013 AT 5:30 PM

The challenges facing the city of Detroit are well-known. The city is saddled with $15 billion in long-term debt. State-appointed emergency manager Kevyn Orr has taken over its finances and offered pennies on the dollar to its creditors. In the coming weeks, he'll likely decide whether to declare the largest municipal bankruptcy in American history.

But there are signs of hope in the city. Indeed, almost every one of the many stories written about the possibility of a Detroit comeback tends to focus on two parts of the city: Downtown and Midtown.

In the former, a popular billionaire has invested more than $1 billion as part of an effort to bring jobs into the city's core. In the latter, occupancy rates for housing are at 96 percent, and new restaurants, apartments and galleries continue to open daily.

Linking those two areas is Woodward Avenue, known as Detroit's Main Street, one of the primary corridors running through the city. Civic leaders say that continuing growth in Downtown and Midtown is crucial to city's broader economic development efforts, and one of the best ways to do that is with a new transit line expected to break ground this fall.

"This really is the economic core of Detroit (and) has the singular potential to drive economic growth, tax base growth and population growth," says Jared Fleisher, an attorney who serves on the board of the M-1 Rail Corp.

The organization has solicited bids for construction management and is the process of negotiating a deal. By this fall, crews would begin work on the 3.3-mile, 11 station streetcar line along Woodward Avenue, with trains running in fall of 2015.

Nearly every major destination of note in Detroit -- including the city's professional baseball and football stadiums, the historic Fox Theater, the Detroit Institute for the Arts, Wayne State University, two hospitals and the public library -- will be linked through it.

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"You've got all these assets that are going to be the engines for Detroit's economic growth," Fleisher continues. "All this is happening because of these assets that are dotting the corridor. The whole logic is to connect all these assets (and) catalyze development between them."

The project is the culmination of years of work. In 2009, the M-1 Rail Corp. was formed with private, philanthropic and public support to focus on developing a transit system in the area. Its efforts became focused on a 9.3-mile light-rail project that ultimately fizzled. Those plans soon morphed into a bus rapid transit concept and eventually returned to the idea of the shorter light rail line, which remains the plan today.

In January, the feds announced the project would get $25 million in support, and April, it got the final go-ahead after receiving federal environment clearances.

The project's capital costs are projected at $131 million, plus another $5.1 million annually for operations.

What makes the project so unique is the huge portion of private and philanthropic funding that's been committed to it. Besides federal support, public funding is coming from the state government, Wayne State University, Wayne County, and the city's Downtown Development Authority. But a slew of local businesses and foundations have made major commitments too.

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Local businesses like Quicken Loans, Penske, Compuware, Chevrolet, Chrysler, Blue Cross Blue Shield of Michigan, the Detroit Medical Center and the Henry Ford Health System have each pledged $3 million. The Ford Foundation and the W.K. Kellogg Foundation have each pledged $3 million, and the Kresge Foundation has pledged $35.1 million.

“Nobody in America – no community – has ever raised $100 million for a project like this," then-U.S. Secretary of Transportation Ray LaHood said earlier this year. "That is unprecedented."

State lawmakers -- after decades of unsuccessful attempts -- last year created a new regional transit authority for the Detroit area. The plan is for the M-1 Rail Corp. to operate the light rail for 10 years after construction's complete and then transfer the assets to another entity, which could be the new transit authority. Fleisher, the board member, emphasized his organization doesn't want to be the long-term operator of the project.

The project's donors will continue to contribute funding and purchase naming rights on the line in order to create a $10 million operations fund. That money, along with fares and advertising, would fund 80 percent of the rail's operating costs, with the assumption that the state will pick up the difference.

Once construction begins, officials don't expect the work to be too complex. The line is a relatively straight shot along Woodward, with no tunnels or turns. The work is being done in conjunction with a previously planned reconstruction of Woodward Avenue led by the Michigan Department of Transportation.

Trains would run daily every 8 to 12 minutes, and each ride would cost $1.50. Projections indicate an expected 5,000 to 8,00 riders daily. The hope is to begin construction of the line starting in Downtown, as early as this fall, and then move on to construction in Midtown in the spring of next year.

Downtown Detroit's other rail system, the infamous "People Mover," debuted in the 1980s, largely with the help of federal funds. It was originally planned to be part of a broader rail system encompassing the metro region, but when those plans fell through, all that was left was the 2.9-mile downtown loop which has often been criticized as inefficent.

While some may wonder how a city that's nearly insolvent can afford the latest rail undertaking, Fleisher says the local contribution is not really in jeopardy. The city's $9 million contribution towards the undertaking comes via the Downtown Development Authority, which has a separate revenue stream from the rest of the city government, and Fleisher doesn't expect the rail line to be threatened by dire circumstances affecting the rest of the city.

M-1 Rail officials are currently working to develop a plan to assist those who will take a financial hit when construction impedes traffic and access to their businesses. That might include forgivable loans, marketing assistance, and the establishing of temporary parking locations. M-1 Rail officials have met with leaders from the Minneapolis area to learn more about the strategies they used to help businesses impacted by construction of a rail expansion last year.

One thing the Detroit streetcar doesn't do is introduce transit service to an underserved area. Indeed, Woodward is a busy corridor, and at least four bus routes serve the same area that's getting a streetcar. That's caused some grumbling that the service is redundant, and money could be better spent connecting parts of the city that aren't well-connected.

But rail advocates in Detroit and across the country argue that light rail and streetcars are generally more attractive to riders than buses, and thus get more passengers. Importantly, rail is also generally seen as a tool to promote development, since permanent tracks in the ground are seen as an indicator of a strong commitment to transit in an area.

Sue Mosey, an M-1 Rail board member who also leads an organization that promotes development in Midtown, says businesses trying to relocate to her neighborhood are already citing the streetcar as one of the motivating factors.

She says the streetcar line likely won't serve many commuters, given its limited length. But the hope is eventually have the line hooked up to a second phase that goes all the way to Oakland County so that it could serve that purpose one day.

For now, it will be especially useful in promoting continued residential growth in Midtown.  "When the rail comes in, we expect the demand to go way up," Mosey says. "For a lot of the young professionals coming in here, rail is a big thing. It's a core thing they're looking for in a city."