Ald. Bob Donovan
Press Release

Do You Believe Us Now?

The Milwaukee Streetcar Will – Sooner Rather Than Later – Need Your Tax Dollars

By - Jun 27th, 2019 08:34 am

For years, we have said that the time would come when all the corporate good will in the world and all the promises of sponsorships would not be enough to keep the Milwaukee Streetcar in operation.  And, when that time came, we said with equal certainty, that it would fall to Milwaukee’s tax-payers to make up the difference.

We knew it. Our constituents knew it. And yesterday, at the meeting of the Public Works Committee, representatives of Mayor Tom Barrett’s administration admitted that it could be so.  What was shocking was not the admission itself, although it was refreshing to finally hear it from the administration, but just how soon our already-scarce revenues might be needed.

Next year.

Mr. Dave Windsor, the system’s manager, told the Committee that his 2020 operating budget is facing a shortfall of as much as $1.5 million. It is true that he said the City was seeking revenues from informational kiosks and other forms of advertisement. It is also true that the City continues to seek corporate sponsorships. The sad fact, however, is that he could put a hard dollar amount to none of these. Far worse, when pressed on what he would do if this new money was not forthcoming and the streetcar’s existing resources ran out, he said flatly that he would turn to the Parking Fund.  For those unfamiliar, this is money regularly used for other purposes. This is real City revenue that would be directed to the streetcar.

How many police officers could we hire to patrol our streets for $1.5 million? How many potholes could we fill? How many streetlights could we replace? How many alleys could we pave?  How many homes could have lead paint removed from their walls and windows? By the way, this number will only increase as the grants underwriting the streetcar’s operation expire and the generous contribution of the Potawatomi is spent. How can we, with a straight face, ever complain about not receiving our fair share of state revenue when we are unwisely willing to spend money we do receive on a failed system?

How do we know it is failing?  In its coverage of yesterday’s meeting, the local media focused on a different aspect of Mr. Windsor’s testimony than we discuss above.  They focused on his astonishing remark that the streetcar’s operators have decided – with very little fanfare – to keep the streetcar fare-free through 2020.  In fact, he testified that they had not even let the contract to install the fare collection devices for which they had budgeted $400,000. Why did they make this decision? He cited a concern that the imposition of a fare would cause a significant downturn in ridership and might not even be worth the cost of installing the collection equipment.

Translation:  the streetcar will never pay for its own keep.

The Milwaukee Streetcar is now, for all to see, a failure built on a foundation of magical thinking, wishes, and mismanagement.  Even at this late date, the Common Council must work to ensure that is ended. Streetcar proponents worked mightily to prevent the project from being submitted to a referendum.  We all know why.  It is, therefore, fitting that all of our seats are up in April 2020, mere months after council members will have to vote on an annual budget that could, based on what we mention above, include City revenue for the streetcar.

Our constituents will be watching, and they may yet get their referendum after all.

Statement from Aldermen Bob Donovan and Mark A. Borkowski – June 27, 2019

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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8 thoughts on “Do You Believe Us Now?”

  1. Gregg Mulry says:

    Public transportation never “pays for its keep.” Have buses ever done that? Trains? Subways? Highways, sidewalks, parks and libraries don’t pay for their keep either. Yet all these things enhance our city. Mr. Donovan will only look for evidence to back up his never ending streetcar shade campaign. Our tax dollars will always be limited and thus force hard decisions as to what gets funding and what gets cut. Mr. Donovan may believe his preferences are the correct ones, but many disagree.

  2. Terry Ott says:

    Look, Gregg, I will speak plainly and briefly. It’s a joke, this streetcar running right alongside my home. Its “justification” has been a source of bafflement to the many people I’ve chatted up while walking about, starting way back with the announcement. Head-shaking and eye-rolling were the most common initial reactions. Sometimes, it came back to me as a question: “Do YOU know why they’re doing this?”

    Next, I agree with you that no one in their right mind should expect anything the government chooses to do to “pay for its keep”. So, what CAN we expect government spending (on anything) to do? Let me suggest the following:

    1. Meet the needs and advance the interests of a substantial portion, if not the majority, of citizens and businesses.
    2. Be scrupulously open in terms of how, where, how much, to whom, and when the spending will occur and what the consequences (intended; unintended) are likely to be.
    3. Evaluate, and communicate about alternatives to the spending proposal in a way that convinces most of us that the ultimate decision(s) are optimal.

    To the powers-that-be: When The Hop is dismantled, wires and tracks removed, PLEASE let us know the timing well in advance. I’ll need to be saving $$ for going somewhere that summer.

    And to the elected city official who wrote back to me years ago that I shouldn’t even be concerned about the cost of what has become The Hop because “it’s mostly Fed Govt money”, I say “Thank You”. You have given me a lttle story that I’ve relied on several times when discussing how our public finances have gotten so screwed up, with no end in sight.

    Finally, to the Mayor: (1) Thank you for putting trash containers on the streetcar station platforms. Might have done it so that recyclables were in a separate place, but partial credit is due from those of us looking for places to jettison dog poop. (2) Is there a plan to put up street name signs on corners where they are missing? The DNC would probably appreciate that.

  3. Barbara Richards says:

    I’d rather my tax dollars go for the public good rather than enable billionaires to extract more money from our city for their arenas and ball parks! As is, the HOP has its limitations. As the seed for building a public transportation system for our region, I am only hoping it can get far enough along before we are too late. I am also hoping WE Energies stops holding on to the past and ditches coal and goes solar and wind. Clean Electric is the only chance my grandchildren – yours too- have, that and just plain using less…energy. You love our beautiful Lake Michigan and Wisconsin countryside, our many parks. They are not our environment they are our life. Our addiction to the automobile is destroying that life.

  4. TransitRider says:

    Terry Ott, after the streetcar got final approval, a downtown building boom started. These construction projects pay taxes, and the increased tax revenue exceeds the Hop’s annual operating subsidy (even if no fares are ever charged).

    Similar construction booms occurred in conjunction with similar streetcar startups in other cities (Portland, Seattle, Washington DC, Cincinnati, Detroit, Tucson, and Kansas City).

    Government subsidizes transit because it also subsidizes freeways. Before the feds subsidized highways, transit was profitable and needed no subsidies. Freeways were built mostly because of “free” federal money—$9 from Washington for every $1 ponied up locally. (That 9–to–1 match far exceeds the 1–to–1 formula used for transit, like the streetcar.)

    To see what happens when “free” federal freeway money disappears, visit Canada, whose federal government doesn’t fund freeways. Winnipeg, for example, has zero freeways, even though it’s a bigger city than Milwaukee.

  5. Terry Ott says:

    TransitRider: Nothing personal, but I have several issues with your statements (perhaps I’ll post separately). For starters this relates to your claim about the development boom surrounding The Hop, i.e., what role the streetcar planning and operations have had in that. The following is a summation of research reporting that appears in full in the Spring 2019 issue of Diggings, a publication of the Badger Institute, written by free lance journalist Ken Wysocky. It’s edited down here for brevity, but no data is altered. Link to complete article:
    https://www.badgerinstitute.org/Diggings/Spring-2019/The-Hops-influence-is-a-flop.htm

    Last Fall, Mayor Tom Barrett announced that in the three years since city officials approved the $128 million streetcar project, assessments of properties within a quarter-mile of its 2.5-mile route have jumped nearly 28 percent, to about $3.95 billion. That compared with a 13.4 percent increase citywide. Barrett said the streetcar was the catalyst behind the $862 million surge in valuations within the defined areas since 2015.

    To test Barrett’s claim, the Badger Institute reviewed the 15 real estate projects that contributed most to that $862 million valuation increase. In all, those 15 large projects — which featured either new construction or significant renovations to existing buildings — generated nearly $564 million of the gain, or 65 percent, based on figures provided by the city assessor’s office.

    The review was followed by interviews with all but one of the 15 developers. The result: 14 of the developers — whose properties generated over $558 million of the $564 million increase — say The Hop did not influence their projects. In some cases, in fact, the projects were in the planning stages or already underway before the streetcar was approved in 2015.

    The bottom line: The Hop had no influence on almost two-thirds of the $862 million increase in property valuations since 2015. And the vast majority of the remaining third was spread over hundreds and hundreds of smaller properties throughout downtown that arguably could not have been affected much, if at all, by The Hop.

    The property with the biggest three-year valuation jump is the Northwestern Mutual Tower and Commons at 805 E. Mason St., with a $259 million increase. Northwestern Mutual officials confirmed the obvious: The project was in the works well before The Hop was approved, thus nullifying any potential impact on the decision to build.

    The same is true for another big-ticket development, the 833 East Michigan office tower, whose property valuation rose $84 million. But developer Mark Irgens …. says the streetcar didn’t affect his decision to build the tower. Ditto for his decision to build the $132 million BMO Tower now under construction at 790 N. Water St. “The BMO and 833 projects were not affected by the streetcar,” he admits. “We made those decisions based on our assessments of market demand and working with tenants that wanted to sign (rental) pre-commitments with us.”

    On the other hand, Irgens says, many tenants view the streetcar as a nice amenity — but not so nice that they’re willing to pay higher rent to occupy a building located right on The Hop route, rather than occupy one a block or two off the route with lower rent.

    Developer Stewart Wangard, owner of Wangard Partners, says the streetcar did not influence his decision to develop two properties on the northern end of downtown: the 1433 North Water Street building (the site of the old Laacke & Joys sporting goods store) and the Avenir Apartments/retail building at 1437 N. Jefferson St.

    Tim Dodge, majority owner of Hanson Dodge, an advertising agency in the Third Ward, says the streetcar didn’t prompt him to don a developer’s hat and renovate and add onto a building at 318 N. Water St. “The Hop did not influence our decision,” he says. “I don’t think anyone looking to make multimillion-dollar real estate investments is looking to The Hop for (their project) to be successful.”

    John Mangel, chief executive officer of Chicago-based Phoenix Development Partners, says The Hop had no impact on the decision to turn the old Blue Cross Blue Shield building at 401 W. Michigan St. into The Buckler apartments. “Our project started way before the streetcar was even considered,” he says. “Quite frankly, we just looked at The Buckler building as a property we could get out of the recession at a very low basis, plus we loved the location.”

    Ditto for Riverview Realty Partners of Chicago, which spent $17 million on renovating the 411 East Wisconsin Center office building before recently selling it to Middleton Partners, another Chicago-based firm. “The streetcar didn’t influence our decision,” says Jeff Patterson, president and chief executive officer. “But it’s definitely a good thing for that area … and as it gets completed, I think it will cause more residential development downtown.”

    Keith Jaffee, president of Middleton Partners, says The Hop played no role in the company’s decision to buy the 411 East Wisconsin building from Riverview. “We just love Milwaukee,” he says. “We’re a Chicago-based company, but we just love the market there and want to continue to support it — grow our footprint there.”

    Other real estate developers contacted by the Badger Institute also confirmed that The Hop did not affect their development decisions downtown, but they declined to comment publicly.

    One developer in the top 15 gave The Hop a thumbs up in terms of influence on development decisions. Andy Farbman, chief executive officer of the Farbman Group, a Michigan-based commercial real estate developer, says the streetcar was somewhat of a factor in his company’s decision to renovate the old Marine Bank building, known as the Chase Tower, at 111 E. Wisconsin Ave. “Our decisions to invest capital in an asset are based upon many factors,” Farbman said in an email. “We were certainly aware of the improvements being made in public transit, and it was an added bonus.”

    Does mass transit in general affect Farbman’s real estate development decisions? “Yes,” he says. “All types of transit are important factors when deciding upon development and location. Much of the workforce that our tenants and prospective tenants are focused on retaining rely on all sorts of mass transit.”

    A prominent downtown developer, Joshua Jeffers, agrees with Farbman, noting that The Hop has strongly influenced his decisions about real estate development downtown. While he doesn’t have projects in the top 15, he’s been a vocal streetcar advocate. In fact, at the mayor’s press conference, Jeffers said that since 2011, when the initial route for the streetcar was proposed, his company has purchased, built or is in the process of building approximately $132 million worth of properties at six different sites, all directly on the streetcar line. “So far, they’ve all been very high-performing investments, and I’m excited to see how they do going forward,” he said. “This is a huge milestone for Milwaukee.” Repeated attempts to reach Jeffers for comment were unsuccessful.

    City Development officials downplayed the interpretation of the assessment figures. “When those numbers were published, the way they were received was a little different than how we intended it,” says Dan Casanova, economic development specialist lead. “The 28 percent increase was supposed to be a minor point, but it’s what everyone picked up on.

    “Our intention is to track these numbers over time … and see if they change differently than the rest of the city or downtown,” he says. “We think the majority of the impact will come in one or two years when projects along the route break ground and come online,” he adds. “(Media) reports that (the increased valuation) was due to the streetcar … that wasn’t entirely the case for every project. There’s never a single factor for why a project happens.”

    The top 15 real estate development initiatives that contributed most to the $862 million increase in assessed value of properties within a quarter mile of The Hop since 2015:
    (1) Northwestern Mutual @ 805 E Mason
    (2) 833 E Mason (offices)
    (3) 411 E Wisconsin (offices)
    (4) 7Seventy7 (Northwestern Mutual) @ 777 N Van Buren
    (5) Aperture Apartments @ 1635 N Water
    (6) The Buckler @ 401 W Michigan (apartments)
    (7) Klimpton Journeyman Hotel @ 310 E Chicago
    (8) 1433 N Water St (office/retail)
    (9) Westin Hotel @ 550 N Van Buren
    (10) Avenir Apartments @ 1437 N Jefferson
    (11) The Mayer Apartments @ 342 N Water St
    (12) Homewood Suites by Hilton @ 500 N Water St
    (13) Mercantile Building @ 318 N Water St
    (14) Chase Tower @ 111 E Wisconsin
    (15) Milwaukee Marriott Downtown @ 321 E Wisconsin
    ===========
    My comment: Anyone should recognize that whatever Mayor Barrett says about The Hop will be positive (spin), as if he were its parent; it IS his baby. Thus, we should not take such PR claims at face value but rather should dig into them, as Mr. Wysocky has done. Wysocky may be an ardent opponent of The Hop; I just don’t know. But, that should matter little as long as his facts and his presentation of them hold up under scrutiny.

  6. TransitRider says:

    Terry Ott, the study you cite hardly comes from an objective source. The Badger Institute is one of many conservative “think tanks” funded by brothers Charles and David Koch. The Koch’s made their fortune peddling petroleum products and they oppose anything that might lead to lower petroleum consumption, like public transportation. You can read more about the Koch brothers’ sordid environmental and ethical history here:

    https://www.rollingstone.com/politics/politics-news/inside-the-koch-brothers-toxic-empire-164403/

    The fact is that the City predicted that there would be a boom in downtown construction if the streetcar was approved (and there was). And the same thing happened in other cities that opened similar streetcar lines since 2000: Portland, Seattle, Kansas City, Cincinnati, Detroit, Washington DC, and Milwaukee.

    Either that is an amazing coincidence or there is a cause and effect relationship at work here.

  7. Terry Ott says:

    TransitRider: I know all about the Kochs’ antics and also their family history, based on numerous articles and watching a documentary about them. So, tell me, how do they relate to the conclusions from first-hand research as reported in the article? It was published elsewhere, too, at least in BizTimes: https://www.biztimes.com/2019/ideas/economic-development/milwaukee-biz-blog-the-hop-hasnt-influenced-development-downtown/

    Are you alleging or implying the Koch brothers are behind this story or that they care about The Hop? Really? Or do you just like going off against those schmucks? Instead, what you could claim in order to cast doubt on Wysocky’s reportage is one or more of these kinds of things:
    1. His methodology for collecting the information via interviews of developers, company-by-company is flawed; or,
    2. He is lying about what the named individuals told him; or,
    3. He omitted findings that would not support his conclusions in favor of those that DID; or,
    4. He personally has a history of being untruthful in his reporting; or,
    5. He just made stuff up… etc.

    Perhaps the author IS biased against the streetcar generally; in fact, I’d be willing to stipulate that he probably is, though I have no way of knowing at this point, and don’t care. Maybe he’s just skeptical of the Mayor’s PR, given that Barrett is clearly NOT an unbiased source of information with staff to do glittering press releases, nifty presentations, and the like. I doubt that Ken Wysocky (a free-lance writer/journalist) has any of those advantages, so he had to dig stuff up himself. I admire good reporting, and my journalist father taught me to look for fact-supported arguments, and to question unsupported opinions unless based on personal experiences.

    I must challenge your assertion of a cause/effect relationship between The Hop and a “boom in downtown construction”. It was just exactly THAT claim that is unmasked by Wysocky’s article. That’s what he went about testing by doing field research and he found any connection to be inconsequential. Now, did the City predict a boom in downtown construction? Sure! Would they have predicted a boom in downtown construction without there being a streetcar in the offing? Sure; It’s what city officials do when promoting how great they are as the movers-and-shakers. And in fact, just based on my personal observation boom times would be a safe prediction — simply by extrapolating what’s been going on here for a couple of decades.

    My thoughts on this also reflect personal experience. Lived in Shorewood through the 1970’s and early ‘80s and worked just north of downtown. Moved to the Chicago area for almost 20 years. When we left, the urban center of Milwaukee was pretty dead, partially abandoned it seemed, including the desolate area along the river where I drove to/from work. Also the residential area just north of downtown that had been eradicated to make way for a lake-hugging freeway that never happened. Parking for our church was on unpaved vacant land along Ogden and Lyon. Twenty years later we bought a pretty nice newer residence on that same land, part of Mandel’s “empire” of apartments and condos. But around that time, and for years into the future we could have gone to any number of new/renovated condo/rental apartment/townhome residences including buildings along the river downtown and north and then south, too, in the Third Ward area.

    What were we saying and hearing in those years (early 2000’s)? Mainly, “What are these developers thinking? All this residential construction and rehabbing of old buildings for people potentially wanting to live in and or near downtown?” And, “No way there’s enough potential occupants. It’s become crazy town; a copycat fad.” And, too, ” Just wait, they’ll be GIVING those places away and taking their losses as tax write-offs!” You know what we WERE NOT hearing back then? We were not hearing, “I’m going to invest and/or build and/or move because I have a hunch that someday in the unforeseeable future there just might be a little train going around in circles a few blocks away. None of that.

    So, to me, that’s when the downtown building scene took off, and it’s still going. Flattened when the economy cratered, but then came roaring right back. It was all about people coming in from the burbs as empty nesters, younger people looking for a somewhat more urban lifestyle after college, people wanting to be close to the lake and river, etc. Were you around here in those years and, if so, do you remember it differently?

  8. TransitRider says:

    Terry Ott, you said “Are you alleging or implying the Koch brothers are behind this story or that they care about The Hop?”

    Yes, I am.

    The NY Times reports: “In cities and counties across the country — including Little Rock, Ark.; Phoenix, Ariz.; southeast Michigan; central Utah; and here in Tennessee — the Koch brothers are fueling a fight against public transit…”

    https://www.nytimes.com/2018/06/19/climate/koch-brothers-public-transit.html

    And on several occasions the Koch’s—through surrogates like “Americans for Prosperity” (AFP)—have singled out the Hop:

    • In 2012, AFP set up a website opposing the Milwaukee streetcar.
    http://archive.jsonline.com/news/milwaukee/americans-for-prosperity-joins-milwaukee-streetcar-opposition-196h6qi-166449346.html/

    • Also In 2012, Randal O’Toole, under the auspices of the “MacIver Institute”—another Koch surrogate, wrote a misleading and (in part) outright false analysis opposing Milwaukee’s streetcar plan.

    • In 2013, Ald. Bob Donovan held an anti-streetcar press conference featuring AFP, MacIver, and Randal O’Toole (in the flesh)
    https://www.masstransitmag.com/rail/article/10890295/milwaukee-streetcar-plan-brings-outside-conservative-think-tanks-into-debate

    • In 2014, AFP backed a (failed) anti-streetcar petition drive.
    https://urbanmilwaukee.com/2015/01/20/murphys-law-koch-funded-group-backs-anti-streetcar-drive/

    So, yes, I think it’s fair to say the Koch Brothers do care about the Hop and want to see it fail!

    Now, regarding Wysocky’s article itself…

    You said Wysocky “had to dig stuff up himself”, but the article itself says that Wysocky got much of his material from the right-wing Badger Institute.

    Don’t believe me, look at what the article itself says:
    • “Badger Institute reviewed the 15 real estate projects”
    • “Badger Institute’s findings” (This phrase appears twice.)
    • “Irgens [a developer] told the Badger Institute”
    • “Other real estate developers contacted by the Badger Institute also confirmed”

    Based on Badger’s findings, Wysocky said the streetcar played no role in the decision to build the “Avenir” project and cites its developer, Stewart Wangard, as the source for that claim,

    But according the Journal-Sentinel, Wangard WAS thinking about how the streetcar would benefit the Avenir before he began construction:

    “Avenir will tap into strong demand among younger professionals for high-end downtown apartments, Wangard said. He said its location near a stop for Milwaukee’s proposed streetcar, and the continued growth of Northwestern Mutual Life Insurance Co., are among the factors that will help the development attract renters.”

    http://archive.jsonline.com/business/work-to-begin-at-park-east-development-site-b99110772z1-226052691.html/

    Note that this J-S article ran in 2013, more than a year before the streetcar was approved in 2015 and before Wangard broke ground for the Avenir. This shows that at least one developer was thinking about the streetcar well before the Common Council approved it. This disproves Wysocky’s contention that no construction decision made before the streetcar’s 2015 approval could possibly have been influenced by the streetcar.

    For two other major projects (BMO tower and 833 E Michigan),Wysocky says tenant demand (not the streetcar) was what caused construction to proceed. But then he admits that the prospective tenants like the streetcar (which actually means that the streetcar had an effect on those projects’ launches).

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