If you liked 38 Studios you may love the Providence Streetcar. The plan by the City of Providence and RIPTA to build a 2.1 mile streetcar line from the East Side to Rhode Island Hospital has eerie (and cautionary) similarities to the fiasco surrounding Curt Schilling’s failed video game company:

• Tens of millions of dollars to be borrowed by the city without voter approval
• A project of questionable value
• A payback plan based on speculation
• Taxpayers ultimately holding the bag

Let’s take these one by one.

Borrowing Without Voter Approval

The greatest share of funding for to build and operate the Providence Streetcar ($57.7 million out of total project cost of $117.8 million) is proposed to come from Tax Incremental Financing (TIF) by the city. The TIF plan commits the city to make bond payments with no voter approval for 30 years using money paid by property taxpayers in a specially defined section of the city (TIF district). This is money that would arguably otherwise have gone to things like schools, police, and pothole repair.

According to the city’s long-range planning director, Bonnie Nickerson, a new application for federal Transportation Investment Generating Economic Recovery (TIGER) funding was filed this spring, with a decision expected by September, and the TIF plan is currently pending in a committee of the City Council.

If the project is approved and signed by the mayor, the city will issue the “revenue” bonds with no action by the voters. Repayment of approximately $93 million, including projected 3.5% interest, will be made over 30 years by earmarking 50% of all increases in property tax payments from all taxable property within the very large TIF district. Proponents justify this by asserting that the increased tax revenue would not exist without the streetcar, but that is questionable at best. More on that below.

(There are additional sources of money proposed for the streetcar but this commentary will primarily address the TIF funding.)

A Project of Questionable Value

One would assume, even expect, that an investment of over $117 million in a transportation system would produce better transportation, but the streetcar offers no improvement in transportation.

Traveling on tracks embedded in existing streets, the streetcars would be right in the thick of car and truck traffic (except for the short East Side tunnel stretch). Therefore, they would go no faster than the rest of the traffic at any given time — no faster than the buses that currently serve pretty much the same destinations with no need for construction.

Plus, if there’s an accident on or adjacent to the tracks, the entire streetcar line is dead in the water. They can’t go off the tracks, so they have no ability to use alternate routes or even shift to another lane. This limitation also applies to detours for special events, which RIPTA accommodates all the time on its bus routes but could not do with streetcars.

And if it turns out that today’s planners guessed wrong about tomorrow’s demand, it would cost millions to change the streetcar route. Moving a few signs and sidewalk shelters can change a bus route.

Proponents argue that the streetcar is more attractive and gives a more comfortable ride than the bus. Are those advantages worth the costs without any improvement in speed and dependability?

For comparison, let’s see how the streetcar stacks up against RIPTA’s newly inaugurated R-Line, a “rapid” bus route along Broad and North Main Streets from the Providence-Cranston line to downtown Pawtucket.

The R-Line’s new signage, digital signal control, and other improvements costing about $3 million are projected to speed travel time by about 12% over a seven-mile route, with buses every ten minutes during the day.

The streetcar would operate no faster than today’s buses, with 20% less frequency (every 12 minutes during the day) on a 2.1 mile route, for over $117 million (plus interest on those non-voter-approved bonds).

A Payback Plan Based on Speculation

The most significant (but hardest to prove) argument in favor of the Providence Streetcar is that it would stimulate economic development along the route. The official projections include 3.6 million square feet of new development — that’s equivalent to ten “Superman” buildings — over 20 years, with a total value of about $1.1 billion.

By assigning half of all increased property tax payments in the district to repay the bonds, the TIF plan makes an implicit assumption that all increases in property value in the district for the next 30 years, including inflation, will have resulted in large measure from the streetcar. It includes tax payment increases related to developments that would have occurred if the streetcar had never existed. Considering the size and composition of the district (see map), the assumption that the Streetcar will be largely responsible for all increases in value seems questionable.*

Nor does the plan address the costs of other expensive government subsidies that have been required to attract development near streetcar lines in other cities.

Experiences in other cities shed some light on these uncertainties, showing that, while streetcars may support economic development in high-growth cities where other incentives are in place, they do not create development by themselves, nor are they a major influence.

The literature on the economic development impact of transit projects indicates that benefits are most likely to be achieved when zoning along the route allows high-density multi-use real estate projects.

“Without appropriate zoning, however, the value of a streetcar project declines tremendously” writes Yonah Freemark, an urbanist who has worked in architecture, planning, and transportation and holds a Master of City Planning degree from MIT. “In places where regulations make building large, mixed-use buildings difficult, transportation projects that will not do much to improve mobility will be incapable of encouraging much construction either.”

A new zoning ordinance nearing adoption in Providence includes high-density Transit Oriented Development areas at two points along the new RIPTA R-Line, but none along the proposed route of the streetcar.

Is Portland a Model?

The streetcar system in Portland, Oregon, is often showcased as a model of success. However, a 2012 policy analysis by Randal O’Toole, an Oregon native and Cato Institute Senior Fellow, shows that development near Portland streetcar lines was far greater in areas where significant additional government subsidies were available than in areas served by the streetcar with no additional subsidies.

“Cities cannot expect that a streetcar alone will stimulate development unless it is also accompanied by hundreds of millions of dollars in supporting subsidies and those subsidies are offered in a neighborhood that is in or adjacent to an area that is already rapidly growing,” O’Toole writes.

A report from the Transportation Research Board, Relationships Between Streetcars and the Built Environment, looked at Portland and noted that “other development trends that were present in Portland at that time, such as increased developer demand for more densely developable sites, the real estate boom for condominiums offering urban lifestyles with high amenities in downtown Portland, and rising land costs, likely influenced development patterns and resulted in denser development in the past few years, irrespective of the streetcar.” [emphasis added]

Is the proposed Providence Streetcar adjacent to an area that is already rapidly growing? Is the city prepared to sweeten development deals with additional expensive subsidies? If so, shouldn’t the subsidies be included in the project cost?

David Levinson, a professor in the Department of Civil Engineering at the University of Minnesota and editor of the journal Transport and Land Use, concluded just last year that “we have no evidence that streetcars, of themselves, promote economic development.”

How Much Area Can a Streetcar Influence?

It’s also notable that analyses in other cities look at impacts within two or three blocks of their streetcar lines. By contrast, the proposed Providence TIF district is much bigger, including:

• All of downtown
• Much of the East Side bordering the bus tunnel and Thayer St.
• All of the 195 redevelopment land on the west side of the Providence River
• The Jewelry (or Knowledge) District
• The hospital district
• Land surrounding an envisioned, but not currently proposed, spur line from Kennedy Plaza to the Amtrak station (this includes all of Capital Center)
• Land surrounding an envisioned, but not currently proposed, extension from Rhode Island Hospital to Prairie Ave. in Upper South Providence

The last two items aren’t even included in the proposed route, so why are their increased taxes allocated to help pay for streetcar construction that will not serve their areas? What funding mechanism would be available if we ever wanted to build the rail station spur line or South Providence extension?

And the streetcar idea doesn’t seem to be adding much excitement to the 195 redevelopment process, where interest in the land has apparently been very slow to develop.

With all of this uncertainty, assigning 50% of all property value increases that might occur in the entire TIF district over 30 years to the streetcar seems speculative at best.

Taxpayers Left Holding the Bag

It is reasonable to assume that plenty of increases in property value will occur in the TIF district over the next 30 years that has little or nothing to do with any streetcar. Consider the 195 land, the Jewelry District, and property within a quarter mile of the underground bus tunnel for example. But half of the taxes resulting from increases unrelated to the Streetcar will go to TIF bond payments instead of the city budget, and that money will have to be made up through higher taxes on property owners in the rest of the city.

The financial projections underlying the TIF plan were created by HDR Economics, a unit of a multi-national engineering firm that works on projects like the streetcar. According to its Web site, a goal of HDR Economics is “positioning your projects and programs with the best possible business case for funding.”

Is this the kind of independent, objective evaluation that should precede a public investment of more than $117 million? Or is it reminiscent of the insider pie-in-the-sky process that brought us 38 Studios?

If the Providence Streetcar project goes forward, we will pay for it for 30 years whether or not it produces any public benefits. We know it won’t make transportation any better. Do we believe it will be responsible for enough increase in property value to cover its cost?

Is the Providence Streetcar a good use of your tax dollars for the next 30 years? Do you think you deserve a chance to express a view by voting on borrowing that you will have to repay?

Much like 38 Studios on the state level, the Providence Streetcar TIF plan appears to be legal, but it is questionable on ethical and policy grounds. It appears to be an end run around the homerule charter–mandated opportunity for voters to decide whether to take on a debt and interest obligation of more than $93 million.

However, one big difference is that the streetcar is not a done deal. There’s still time for the leaders and people of Providence to take a hard look and decide if they really want to commit millions of scarce tax dollars without voter approval to a project that will do nothing to improve transportation and has unproven potential to stimulate economic development.

 

* The orange outline shows the area where 50% of all increased property tax values would be diverted to repay Streetcar bonds for 30 years. The plan projects 3.5 million square feet of new development (equivalent to ten “Superman” buildings) and presumes that half of all projected increases in property value in the district would not occur if the Streetcar line is not built. The district includes land surrounding two areas where the streetcar is not actually proposed or budgeted (dotted lines from Kennedy Plaza to AMTRAK station and from RI Hospital to Prairie Ave.).

Arthur D. Norwalk is a Providence taxpayer as well as a freelance writer and marketing communications consultant.