Detroit rail's finances uncertain, taxpayers may foot the bill

The Portland streetcar system is among the best in the nation.

By Chad Selweski
Dome Magazine

The vaunted M-1 Rail line under construction on Detroit’s Woodward Avenue still faces financial uncertainties, despite a scheduled grand opening in late 2016, and Michigan taxpayers could pay millions of dollars if the streetcar project’s questionable revenue projections fall short.
M-1 rail officials who held a groundbreaking with much fanfare last July concede that they’re betting on more than $3 million a year in operating revenues — fares paid by riders, plus adverting on streetcars and rail stations — in order to break even. If achieved, that level of income would be far higher than other streetcar systems across the nation.

Experts say the entire financial plan relies on highly optimistic forecasts that envision the Motor City embracing streetcar service in a much more robust manner than other cities that offer this trendy form of urban transportation.
Despite $100 million in pledges from corporations and foundations to build the three miles of streetcar lines and stations, M-1 Rail has received promises of just $24 million earmarked for the expected operating and maintenance costs over the next 10 years. That’s about $31 million short.

If fare box revenues and advertising cannot fill that gap, state taxpayers will. Under an obscure provision in a 2008 law passed by the Legislature, M-1 is eligible for up to $8 million in subsidies each year. That money would almost certainly come from the state general fund budget.
“We feel pretty confident that there’s a fair amount of advertising and marketing revenue out there,” said Paul Childs, COO of M-1 Rail, which operates on a nonprofit basis.
He added: “We’re probably pushing the envelope on a lot of things on this project.”

Professor Jeffrey Brown of Florida State University, who has studied several of the nation’s streetcar systems extensively, said the 5,000 to 8,000 riders per day projected by M-1 Rail is definitely pushing the envelope.
“The revenue estimate seems very optimistic to me … This would be a very strong performer compared to the other cities that operate streetcars,” said Brown, chairperson of the FSU Department of Urban and Regional Planning who wrote a 2013 research paper on streetcar service for the Journal of Public Transportation.

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