Bankrupt Detroit Breaks Ground on New 3.3-Mile Streetcar Line

Barbara Hollingsworth | August 15, 2014 | 3:16pm EDT
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Dr. Samuel Staley (Reason Foundation)

( – On July 27, the City of Detroit broke ground on M-1 Rail, a 3.3-mile streetcar line that will run down Woodward Avenue from the Central Business District to New Center.

Despite the fact that the city filed for the largest municipal bankruptcy in U.S. history, is $18 billion in debt, and nearly half of its 138 square miles have been abandoned, city leaders hope the new transit project will spur $3 billion in economic development to help revive their dying city.

In April, the U.S. Department of Transportation (DOT) green-lighted the $140 million transit project.

Last year, Transportation Sec. Ray LaHood announced that Detroit would be getting $25 million in federal funds for M-1 Rail. The rest of the construction costs will be raised from private donors.

An earlier plan to build a 9.3-mile light rail line called for the federal government to pay three-quarters of the $528 million cost. But that project was cancelled after DOT balked due to concerns that the city would not be able afford to subsidize the project’s operating costs.

“The city is betting on the streetcar generating a new kind of economic development that will catalyze around this new infrastructure investment. They bought into the rhetoric surrounding these kinds of investments, but most of them have not been backed up by good solid numbers,” Dr. Samuel Staley, managing director of the DeVoe L. Moore Center at Florida State University and research fellow at the Reason Foundation, told

“Most of these projects are based on future estimates that are rarely validated by studies done post-investment,” Staley said, adding that he is highly skeptical that Detroit’s new streetcar will “create the development it’s promising.”

Although he personally likes to ride streetcars, Staley says,“from an economic perspective, they don’t make sense.”

”You need certain fundamentals for a light rail project to be successful, and none of those exist along the Woodward corridor,” he told ”I just don’t see that part of the corridor having the density to make it work, or the City of Detroit having the economic activity in place to leverage such an infrastructure investment,” he added.

“That’s decades away from happening,” Staley pointed out. “The idea that people would move into a bankrupt city with out-of-control spending and the worst public schools in the nation because of a streetcar really strains any concept of credibility.”

The light rail line will connect with Detroit’s People Mover, which runs in a 2.9-mile loop around the downtown section of the city.

Detroit's People Mover. (AP photo)

The People Mover, which opened in 1987, was designed to carry up to 15 million riders per year, but attracted only 2.2 million passengers last year, according to data from the American Public Transportation Association.

The line has to be heavily subsidized by Detroit taxpayers because the 75-cent fare only covers 11 percent of the operating costs per passenger mile.

Staley says that the MI-Rail project is likely to share a similar fate.

“Economic development creates the foundation for rail success,” he pointed out. “Rail doesn’t create the foundation for economic success.

"As I’ve said before, transit doesn’t build cities. Cities build transit networks.”

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