The predicament in which the city finds itself is the result of letting the prospect of “free” federal money determine local policy.
By DAN BENSON | Aug. 9, 2016
The news that the City of Milwaukee missed out on $20 million in "free" federal grant funding to extend the Milwaukee streetcar along N. 4th St. to the new Milwaukee Bucks arena was doubtless met with cries of dismay by the hoardes of city dwellers waiting anxiously to ride Mayor Tom Barrett's $129 million downtown people-mover.
But just as those angry citizens were about to head to the hardware store to stock up on pitchforks and torches, city Department of Public Works Commissioner Ghassan Korban quelled the rolling masses by assuring us that, never fear, the initial two-mile streetcar line and its half-mile lakefront extension were "fully funded" and on schedule to go online as planned in 2018.
Only problem is, they are not fully funded.
What Korban meant is that the construction of the streetcar's first two phases is fully funded — $69.1 million in federal grants and $59 million from three city tax incremental districts, meaning property tax revenue will be diverted to the streetcar for the next 19 years from other city services, such as cops and streets and from Milwaukee Area Technical College, Milwaukee County Sheriff's Department, Milwaukee Public Schools and other tax-supported endeavors.
The operations of the streetcar, however, are another matter.
According to www.milwaukeestreetcar.com, a federal grant totaling about $2.88 million already has been secured that will pay for 80% of the first 18 months of operating costs. After that, there's the "possibility" of a grant extension for an additional 18 months, the website says. To pay the rest of the bills those first three years, streetcar planners are counting on another couple million bucks or so coming from an introductory fare of $1 per ride plus sponsorships and advertising.
And after that? The website says streetcar planners are counting on a "combination of fare box revenue, advertising, corporate sponsorships and — wait for it — "federal funding oppourtunities." That would be more grants.
Laying aside the debate over whether the downtown streetcar is a wise use of tax dollars — proponents say it will spur downtown development, based on some dubious evidence from other cities — one has to wonder about the wisdom of hanging the future of this project on such an unrelaible funding scheme, which depends, as we've just seen, on whether some nameless bureaucrats working for Uncle Sam love our streetcar better than somebody else's Can you say interstate sibling rivalry?
The prediciment in which the city finds itself is the result of letting the prospect of "free" federal money determine local policy. It wouldn't be the first time local officials have done so. One wonders if the federal money wasn't there, would the mayor and other officials still persue the project. That would be refreshing wouldn't it — to actually determine whether the streetcar on its own merits justified such a huge investment by local taxpayers? The first phase of the streetcar line in Portland, which inspired Milwaukee's effort as well as in other cities, was originally built using no federal dollars. So it can be done.
When you add it all up — TID financing and 18 months of operational costs — city officials already have committed to spending about $60 million of city money. Plus, they've approved spending another $20 million in TID money for the Bucks arena extension, should the other $20 million in federal funds ever come through.
And then who knows?
Federal grant money — which, let's be real, originates not in Washington D.C., but in places such as Wisconsin — hardly ever comes without strings attached. Either the feds want states or municipalities to spend our money the way they want or, as is the case with the streetcar, the state or local government has to come up with additional money in the form of a match and then pay for the ongoing maintenance and operational costs. Grant money is rarely free.
If the operational grant money doesn't come through in the coming years, the city would be on the hook to pay the electric bill by itself. Which means if taxpayers can't or don't want to foot the bill, those streetcars could become little more than fully-funded sidewalk planters like the bicycles currently lining Wisconsin Ave.
Dan Benson is editor of WPRI's Project for 21st Century Federalism.
See related story: "The Federal Grant to Nowhere"