Matching funds, investors, design all key to the success of Woodward project

Free Press editorial

A planned light-rail system on Woodward in Detroit could jump-start a regional transit system, providing a foundation metro Detroit could build on after decades of detours and dead ends.

But the rail project can't move forward without match money from a consortium of private investors who have tentatively agreed to fund it. They include the Kresge Foundation and business leaders such as the Ilitch family, Quicken Loans founder Dan Gilbert and Compuware Chairman Peter Karmanos.

The consortium's financial commitment has been questioned lately by some observers, who say private investors aren't happy with project delays caused by federal environmental requirements, or with Detroit's new role as the lead agency.
So it was reassuring to hear Matthew Cullen, CEO of the M-1 Rail initiative, pour cold water on those reports. In an interview with the Free Press editorial page last week, Cullen said private investors remain fully committed, even though their role in the project has changed from owner-operators to investors with no direct say in governance.

"We embrace it," he said. "We just want to get it done, and we couldn't be more supportive of the project and Mayor Bing's leadership of it."

Cullen said he and other board members representing the investors will work with the city to ensure that the project's final plan, due later this year, is financially viable and meets investors' design expectations.

But he acknowledged that no one, including the private investors, should commit to a project that can't financially sustain itself. Investors will also consider the project's design. They want sufficient stops in the downtown area, for example, to generate pedestrian traffic and economic development there. Studies show that every $1 invested in mass transit generates up to $8 in transit-oriented development that could help rebuild and reshape Detroit.

Making the project financially viable poses challenges for the strapped city. To operate the rail system, Detroit could reallocate funding from its Department of Transportation, but weakening the city's already inadequate bus system would strand the quarter of all Detroit households that don't own vehicles -- a serious mistake.

City officials, working with private investors, the Michigan Department of Transportation and the Federal Transit Administration, hope to start construction on a rail line running from Hart Plaza to 8 Mile by the end of this year or early next year, following the conclusion of an environmental impact study. The 9.3-mile light-rail system would likely include electric rail cars and 10 to 13 ground-level stations in the downtown area. It could be running by 2014.

But the success of the Woodward Light Rail Project depends largely on how well the project's private and public bankrollers work together.
As the lead agency, the city must make that happen.

The private investors behind the M-1 Rail initiative propose to fund the first leg of the Woodward line, the 3.4 miles from Hart Plaza to the New Center. The City of Detroit would then use the roughly $125 million in private money invested in the project's first phase to leverage federal match funds to finish the line to 8 Mile.

Detroit seeks to secure about half of the $450 million needed to build the Woodward rail line from federal new-starts grants.

Still, many obstacles remain. The city hasn't developed a plan to pay for operating costs, which are projected to outstrip revenues initially by $10 million annually, or to cover the portion of the local match for federal dollars not covered by the private investors. The city must identify that money before the FTA, which requires a 20-year full funding plan for operations, approves funds for the project.

Even if the Woodward project meets all the benchmarks for new-starts funding, approval isn't certain. The feds must sort through many more proposals from around the country than it can fund. Unfortunately, many worthy transit projects don't get federal approval.
Another potential problem is the uncertainty surrounding the $125 million committed by investors. Some $20 million of that total is contingent upon the renewal of tax credits that expired in 2010. Investors also want the project to eventually become regional, a model also favored by the federal government.

Cullen said Mayor Dave Bing, too, supports a regional approach. To that end, the city ought to drop its shortsighted opposition to a Regional Transit Authority, which would drive the long-term success not only of the Detroit Woodward project but also of an emerging regional transit system that would benefit all of southeast Michigan -- and, perhaps, Detroit most of all.

None of these obstacles should prove fatal, however, given the commitment of the city, investors and federal government. Still, Bing and his administration need to keep investors at the table as the project moves forward. Making this a true public-private partnership would give this critical project the best shot at success.

The history of mass transit in southeast Michigan is littered with failures, including the missed opportunity in 1976 to secure $600 million in federal aid to build a light-rail system because the region couldn't agree on a plan.


Continued at: http://www.freep.com/article/20110109/OPINION01/101090454/Keep-light-rail-opportunity-on-track-for-city-region