Breaking Down the Streetcar Financing Plan

The Hop streetcar extension map. Map from City of Milwaukee.

The proposed three-mile, $160 million extension of The Hop streetcar system to Westown, Walker’s Point and Bronzeville received its first public approvals this week.

The board of the Redevelopment Authority of the City of the Milwaukee (RACM) and the Joint Review Board for City of Milwaukee Tax Incremental Finance Districts both voted unanimously to endorse Mayor Tom Barrett‘s proposal to allocate $51.8 million to the three-phase project (detailed below) which includes a new park, construction of a .4 mile extension and planning for the three-mile, north-south route.

The proposal will next go before the Common Council’s Zoning, Neighborhoods & Development Committee on May 21st where it’s certain to face a much more critical audience. A public hearing will be held on a series of amendments to the tax-incremental financing districts proposed for use in funding the project.

2020 Plan – Extension to Convention Center and Vel R. Philips Plaza

The project’s first phase would allocate $28 million to construct an extension of The Hop from the Milwaukee Intermodal Station to the intersection of W. Wisconsin Ave. and N. Vel R. Phillips Ave (former N. 4th St.). That work is scheduled to begin in late 2019 and be completed in time for the 2020 Democratic National Convention in July.

In addition, $5 million would be allocated to construct Vel R. Phillips Plaza on a city-owned surface parking lot at 401 W. Wisconsin Ave. That project is also planned for completion in time for the DNC.

Extension Planning

The second phase, referred to as “project development,” would include preliminary engineering and planning to extend the streetcar north to N. Martin Luther King Jr. Dr. and W. North Ave. via Fiserv Forum and south to S. 1st St. and W. Pittsburgh Ave. via N. Milwaukee St. in the Historic Third Ward. Project costs for the second phase are budgeted at $18.3 million.

The city has applied multiple times for a second TIGER/BUILD grant to extend the line to Fiserv Forum, but has been unsuccessful after winning an initial grant to pay for an extension to the lakefront. “Only about seven percent of the grants in the last round went to transit projects,” Department of City Development economic development specialist Dan Casanova told the RACM board. “Our goal now is to get into transit-specific grant programs.”

As part of the second phase, the city would enter into the federal government’s Small Starts grant program. The $18.3 million planned to be spent on engineering could ultimately be applied as part of a 50 percent local match for an estimated $160 million grant.

The city, pending a final cost estimate, would still need to come up with an estimated $61.7 million to construct the streetcar extensions to the arena, Bronzeville and Walker’s Point. City officials intend to raise the funding from new or existing tax-incremental financing districts.

Walker’s Point Study

The final phase is a $500,000 study of extending the route south and west from S. 1st St. and W. Pittsburgh Ave. “There are a lot of options in Walker’s Point,” said Casanova before ticking off a list of potential routes including S. 1st St., S. 2nd St. S. 5th St., S. 6th St., W. Greenfield Ave. and W. National Ave.

The city would use the funding to conduct outreach to area stakeholders, perform analysis of underground utilities, study the feasibility to go under various Canadian Pacific railroad bridges and identify other logistical issues. “It could be that we look at all the streets and there is ultimately only one viable option because of the constraints,” said Casanova. The DCD staffer said the city would also examine where tax-incremental financing districts could be created to fund future engineering and construction costs.

But how to pay for the $51.8 million today? Barrett’s administration has introduced a plan to use six tax-incremental financing districts.

TIF In Brief

The streetcar proposal relies on borrowing through six tax-incremental financing (TIF) districts to fund the proposal. TIF districts, three of which were previously approved for use with a proposed $40 million extension of the streetcar to Fiserv Forum, have defined boundaries and included properties. In a TIF district, the city borrows funds to pay for public infrastructure or other associated project costs with repayment coming from incremental property tax revenue from properties within the district.

The city has often used tax-incremental financing districts to support the construction of the riverwalk system. Under the model, the city pays for a fixed percentage of riverwalk construction costs and pays off the associated borrowing with increased revenue from developments along the riverwalk.

Under state law, Wisconsin municipalities can spend incremental revenue from a TIF district on public infrastructure within a half-mile of the district. The city has used the funds in the past to repave streets and build sidewalks.

When a TIF district’s debt is paid off the district is closed and incremental property tax revenue is available for city expenses or marginal property tax relief. Prior to a district being closed, municipalities can raise their state-capped property tax levy proportional to the increased property values within the district.

Districts have a maximum legal life of 27 years.

TIF Districts

District #39 – Hilton

• Amount To Borrow: $4 million
• Use: Construction of streetcar extension to Vel R. Phillips Plaza/Wisconsin Center and project development of the extension to N. Martin Luther King Jr. Dr. and W. North Ave.
• Current Closure Date: 2023 (Year 23)
• Revised Closure Date: No Change
• Maximum Legal Life: 2027
• What’s In the District: Hilton CityCenter Hotel and attached 850-stall parking garage. District created to support the garage’s development
• Note: This borrowing was previously approved in 2016 and is not subject to further council approval
• 2017 Report

District #41 – Time Warner Riverwalk

• Amount To Borrow: $4.5 million ($8 million approved in 2016)
• Use: Project development of the extension of The Hop to N. Martin Luther King Jr. Dr. and W. North Ave.
• Current Closure Date: 2020
• Revised Closure Date: 2023 (Year 23)
• Maximum Legal Life: 2027
• What’s In the District: Spectrum and Manpower office buildings in Schlitz Park. District used to fund riverwalk and parking garage construction
• 2017 Report
• Amendment

District #48 – Park East

• Amount To Borrow: $21 million
• Use: $5 million for Vel R. Phillips Plaza, $16 million for construction of streetcar extension to Vel R. Phillips Plaza/Wisconsin Center and project development of the extension to N. Martin Luther King Jr. Dr. and W. North Ave.
• Current Closure Date: 2022
• Revised Closure Date: 2025 (Year 23)
• Maximum Legal Life: 2029
• What’s In the District: This district encompasses the former Park East Freeway corridor and includes a number of apartment buildings. It was initially used to fund street reconstruction after the highway was demolished. It has since been used to fund riverwalk construction for The North End and 1433 on Water as well as workforce development programs.
• 2017 Report
• Amendment

District #56 – Erie/Jefferson Riverwalk

• Amount To Borrow:  $5.8 million
• Use: Study extension of The Hop through the Historic Third Ward on N. Milwaukee St. to the intersection of S. 1st St. and W. Pittsburgh Ave.
• Current Closure Date:  2021
• Revised Closure Date: No Change
• Maximum Legal Life: 2031
• What’s In the District: This district was created to pay for nearby street reconstruction and the city’s share of riverwalk construction along E. Erie St. It was amended in 2015 to fund $18.3 million of streetcar construction and provide $400,000 grant to Gardner Denver. It was amended in 2017 to pay for Trestle Park. Developments in the district include the Harbor Front, Hansen’s Landing and Marine Terminal Lofts condominium buildings as well as the recently completed DoMUS apartments.
• 2017 Report
• Amendment

District #75 – Reed Street Yards

• Amount To Borrow: $500,000
• Use: Study extension from S. 1st St. and W. Pittsburgh Ave. into Walker’s Point
• Current Closure Date: 2023 (Year 14)
• Revised Closure Date: No change
• Maximum Legal Life: 2036
• What’s In the District: The TIF district was created to fund the redevelopment of the vacant Reed Street Yards into a water technology business park. The Global Water Center, Zurn headquarters, Brix Apartment Lofts and Iron Horse Hotel are all included in the district. Funds have gone towards public infrastructure, a Bublr Bikes station, Brix parking garage and a development incentive fund.
• 2017 Report
• Amendment

District #88 – 4th and Wisconsin

• Amount To Borrow: $8 million
• Use: Fund construction of streetcar extension to Vel R. Phillips Plaza/Wisconsin Center and project development of extension to N. Martin Luther King Jr. Dr. and W. North Ave.
• Current Closure Date: 2033
• Revised Closure Date: No Change
• Maximum Legal Life: 2043
• What’s In the District: The district includes the city-owned surface parking lot at 401 W. Wisconsin Ave. and the parking garage located at 615 N. Vel R. Phillips Ave. The district’s costs are scheduled to be paid back by new development immediately south of Vel R. Phillips Plaza on an approximately 60,000-square-foot lot.
• Note: This district was created in 2016 to form a portion of the local match for a streetcar extension to the arena. Those funds have not been expended. It is not subject to further council approval.
• 2017 Report

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