» Public-private partnerships could bring big benefits to the Motor City. But they might be sending the wrong message about governmental responsibility.
If Detroit has yet to receive the kind of huge public investment that may well be necessary to save it, it hasn’t been entirely forgotten by its natives. Over the past year, a group of individuals and corporations have donated tens of millions of dollars towards the creation of an entity that would construct a new rail line down the city’s primary corridor, Woodward Avenue. Their example of direct private involvement in a transit project for a non-profit purpose is unique, and the U.S. Congress has authorized what may be a first-in-the-nation approach. Is it the right one?
Detroit, as has been discussed over and over, has been losing population for decades and its industrial base has been disappearing for years. The city’s leaders have been notoriously poor at responding to its problems; most relevant to this website, they rejected several hundred million dollars in the 1970s for a full-scale rail system, ultimately building only a one-way loop around the city center called the People Mover — a depressing failure.
The group of private and non-profit investors, calling themselves M1 Rail, are attempting to use spending on a 3.4-mile light rail line down Woodward to revive the city’s spirits and potentially its economy. This corridor runs diagonally out from the center of the city and has always been considered the top priority for transit investment in Detroit. The group’s $125 million project would extend from downtown’s Hart Plaza to Grand Boulevard and include 12 stops, meaning one every quarter-mile. This proposal, now almost fully funded, seems on the brink of reaching the construction stage. Using federal funds, the city would eventually extend the line to a total of eight miles at a cost of $425 million.
Incapable of paying a 40% share in the project’s cost, the minimum local (or state) commitment to a New Starts rail project, Detroit officials asked their representatives in Congress to count the M1 spending as part of the local share. That way, the city would be able to qualify for a full 60% aid from Washington as long as it were able to cobble together the missing ten percent.
In the recent spending bill, Detroit got its way. By allowing the private money to be considered part of the local match under the Federal Transit Administration’s guidelines, Detroit’s chance of extending this project further than just what is planned by M1 rises exponentially.
This sets an interesting precedent: private companies, in this case working with a non-profit motivation, can attract federal funding for an extension of their project. Will this legislation affect other cities? What happens when a private company involved is profit-motivated?
These questions may be premature, since unless the FTA alters its quite controversial cost-effectiveness guidelines, Detroit may not be able to win those New Start project dollars upon which it has staked the future of its public transportation system. Compared to other planned lines around the country, Detroit’s project is likely to attract fewer users (being surrounded by the city’s half-vacant landscape) and be just as slow as existing bus service (with so many stations).
Still, if the project goes through, with a private group taking the first step and the public coming in for a second act, Detroit may be teaching other cities a new trick — and potentially putting itself and others in danger.
If, instead of keeping its money to itself, the M1 group had simply donated the $125 million it plans on raising to the City of Detroit for the purposes of building this line, no Congressional action would have been necessary; this money, under public control, would have been considered the local match automatically. But it is apparent that those working with M1 do not trust the municipal government, and perhaps that is a justifiable position considering Detroit’s track record. As a result, the first stage of the project will be built by M1 and then operated by the group, with city involvement only on the second stage.
In Detroit’s circumstances, this seems like an acceptable compromise, especially considering that those who have donated to the project clearly don’t expect to be making money on it.
But if the government allows such funds to serve as the local match in the future in other cities, the situation could be quite different. What happens if the investors on the first stage of the line stand to reap a large monetary gain (read: real estate related in the case of most cities) from the construction of the second stage? Can there be guarantees that the initial project’s operations will be maintained over an extended timeline? Would the federal government be put in a compromising situation in such a case? Shouldn’t cities be the decision-makers when it comes to transportation investments, and if so, is there any role for private groups at all?
Detroit, in other words, has a situation that seems pretty cut-and-dry — the federal government should clearly count the M1 funds towards the local match. It’s what happens elsewhere that could be problematic.