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Cities Try New and Traditional Ways to Finance Streetcars

June 21, 2011

From ULI’s Urban Land – William Lee, executive vice president with AECOM in San Francisco, reviewed financing approaches for new streetcar systems in nearly a dozen cities—including Seattle, Washington; Tempe, Arizona; and Salt Lake City, Utah; and others—across the country. These modern streetcars are being built using a variety of funding methods, some traditional and others innovative.

Seattle is using one of the more innovative approaches Lee explored. About half of the $52 million capital costs for the city’s South Lake Union Line streetcar project will be provided by property owners adjacent to the system through a local improvement district (LID), with the remaining costs being borne by the federal, state, and local government. Private sponsorship opportunities for the line and stations will account for about 25 percent of operating expenses.

Other approaches are more traditional. In Arizona, the Tempe Streetcar’s $163 million capital costs will be provided by a mix of regional tax revenue from an approved bond measure and a matching grant from the Federal Transit Administration’s New Starts Program. The system’s annual $3.1 million operating costs will be the responsibility of the city. Salt Lake City’s $56 million Sugar House Streetcar line received a hefty grant from the U.S. Department of Transportation’s TIGER II program that will cover 70 percent of the project’s capital costs. Despite a $5 million commitment from area governments, however, the line still faces a shortfall in local funding.

Local funding approaches, Lee said, are aiming both to raise money for system construction and operation, and also to more fairly allocate the cost burden to the project’s potential beneficiaries. Projects that rely on transit benefit assessment districts, such as the one in Seattle, must address issues including defining who the beneficiaries are, identifying the level of benefit they receive, timing the assessment, and ensuring that there is legislation to enable the district. To date, experience with benefit assessment districts is limited in the United States, but more cities are expected to turn to them to fund the projects they want to build.

Across the country, cities and stakeholders seeking to build new streetcar and light-rail systems are utilizing…to read the rest of this story, please click here.

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