Jeramey Jannene
Transportation

Free Streetcar Rides Planned for 2020

City hopes to maintain free rides to keep up ridership but this could leave funding gap.

By - Jun 26th, 2019 02:31 pm
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The Hop, Milwaukee's streetcar system, on N. Broadway. Photo by Jeramey Jannene.

The Hop, Milwaukee’s streetcar system, on N. Broadway. Photo by Jeramey Jannene.

The Hop will remain free through 2020 under a plan from Department of Public Works officials, but Common Council members are frustrated by the change and worried about the consequences. The original plan was to start charging customers by November.

“As I understand it, and I’ve heard nothing to the contrary of it yet, the city intends to start collecting fares on the hop sometime in November,” said Alderman Robert Bauman at a meeting today of the Public Works Committee. “Unless we put a cardboard box on the floor and let people put in money, I assume there is going to need to be some investment.”

Fare equipment, for which $400,000 remains set aside from the project’s $128 million capital budget, has not been purchased. DPW streetcar system manager Dave Windsor said purchasing and installing the equipment would take up to eight months.

“The reason we haven’t pulled the trigger on it is we know, based on the experience of other cities, that there will be a 20, 30, 40 percent ridership drop. It’s just a fact of life,” said Windsor. The Hop’s ridership has exceeded projections to date.

Atlanta (down 48 percent) and Detroit (down 40 percent) saw drops in ridership once their respective systems started charging. Ridership eventually started to increase again in Detroit, where ridership has surged in the summer, and Atlanta as well.

Windsor singled out Kansas City as the other option. Kansas City continued offering free rides beyond the first year, funded in large part by a levy on nearby properties, and has seen substantially higher ridership than peer systems. Planners projected 2,700 daily riders, but 2018 saw an average ridership of 5,794.

But Milwaukee officials will need to cover a gap in the system’s 2020 operating budget if they don’t start charging. According to the city’s budget, The Hop’s 2019 operation is planned to be funded by a federal grant for operations ($3,457,754), the 12-year, $10 million Potawatomi Hotel and Casino sponsorship ($691,670) and other advertising deals ($250,000).

It had been expected that in 2020, fares would be charged and that would cover 20 percent of the Milwaukee system’s annual budget (the Milwaukee County Transit System recovers 29 percent) once the city starts charging. The revenue from riders is estimated to generated $860,000 annually, one-fifth of the $4.3 million annual cost to operate and maintain the initial streetcar system and lakefront line. The city would need to eventually replace that fare revenue to maintain the system as free.

“We do have a couple things in the works to generate revenue from ads and sponsorships,” said Windsor. “Smart kiosks” that would be installed at stops would display advertising and other real-time information. Windsor said the city projects earning between $250,000 and $500,000 annually from the system. A request for proposals to provide these kiosks has been issued.

However, there’s another gap that looms: the federal funding will run out sometime in 2020, leaving what Windsor said could be a $1 million to $1.5 million gap in 2020. But City Engineer Samir Amin said other deals are under consideration. “We can’t speak to details for who these sponsorships are because they don’t want to talk about it at this point,” said Amin.

“We are hopeful, and it’s our goal, to continue without any city subsidy,” said Windsor.

Should the sponsorships not materialize, the original project plan approved by the council was to leverage revenue from the parking fund to pay for operations.

Election Impacts

Using the parking fund, or any other city funding source, would trigger a situation where the Common Council would need to vote to approve funding the streetcar.

“I guess what stuns me is the lack of political reality. We are all coming into an election year next spring,” said longtime streetcar opponent Ald. Mark Borkowski.

Borkowski said that the council had avoided approving a referendum on the project to date, but that an election would serve as one.

“If you’re going to be supporting funding the streetcar with tax dollars your opponent is going to use that,” said the south-side alderman. “For any incumbent that supports this, be aware of your vote.”

The lack of flexibility on the matter didn’t sit well with Ald. Cavalier Johnson. “Why are we at nearly July and [the fareboxes] haven’t been purchased?” asked the first-term alderman.

“This didn’t sneak up on us,” said Windsor. The DPW veteran said the decision was made to preserve the $400,000 instead of spending it on equipment that might never been used.

“I’m not satisfied with that answer. I’m really not,” said Johnson. “I support the project, but I’m disappointed with how this has played out.”

Elected officials both for and against the streetcar have repeatedly noted to Urban Milwaukee the predicament that they find themselves in having to vote on the streetcar as an election gets closer. A proposal to begin a $160 million expansion of the system remains stuck in the council.

The city will begin its 2020 budget deliberations at the end of summer.

Long-Time Coming

Urban Milwaukee first covered the potential to continue to operate as a free system in January. In early January both Mayor Tom Barrett and Bauman came out in favor of maintaining the system as free.

“We would love to see it extended and we’re working to see if we can make that possible right now,” said Barrett at a press conference.

“I think that’s absolutely a wise idea,” said Bauman in a January interview. “I hope we are able to put together sufficient business and foundation support to make it free.”

A Date on The Couture Extension

While the committee meeting produced a wait-and-see response regarding fares, a timeline was introduced on the proposed 44-story apartment tower The Couture and the streetcar extension approved to run through it.

The extension, approved as part of the original $128 million streetcar approval in 2015, is being funded in part by a $14.2 million federal grant that requires the line to be operational by December 31st, 2020. The Couture has remained in limbo for years as developer Rick Barrett (no relation to the mayor) has tried to secure financing.

Amin said the city would need to move onto Plan B if The Couture has not advanced by August 31st. Bauman praised the city engineer for giving a date.

Developer Barrett Lo Visionary Development was recently given an extension until July 26th to submit a final application for a federal loan guarantee. As part of that application, Barrett has said he’s working to raise the remaining $15 million in equity needed to fulfill a federal requirement. Sources have told Urban Milwaukee that the equity requirement on the project was raised to approximately $50 million.

The city, through contractor Kiewet Infrastructure, has completed approximately two-thirds of the lakefront extension of The Hop which will run via E. Michigan St. and E. Clybourn St. to The Couture site at 909 E. Michigan St.

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More about the Milwaukee Streetcar

For more project details, including the project timeline, financing, route and possible extensions, see our extensive past coverage.

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