Can Sacramento afford streetcar, or will it shortchange poor communities' transit options?

Weighing the pros and cons of the streetcar plan

Who pays for streetcar and who benefits from it? It's not always easy to tell.

There are arguments to be made for all the intangible benefits the streetcar may bring. It's an amenity, it fits a certain vision of a strong downtown. Many people think streetcars are cool, or connect Sacramento to its railroading history.

Proponents also promise streetcar will generate new economic activity and new ridership for Regional Transit. But some of these benefits are probably illusory, the result of siphoning riders from existing RT routes and shifting economic activity from other neighborhoods.

According to an economic-benefits study commissioned by streetcar proponents, about 80 percent of the project's cost are being paid with public funds. The same report shows private landowners and businesses getting 98 percent of the benefit in increased property values and additional retail sales. (The bigger the property owner, the bigger the benefit.) Only 2 percent of that value comes back to local government in the form of increased property and sales taxes.

Part of what makes the streetcar attractive is that the federal government is going to pay half of the construction costs, about $75 million. So that portion at least is not a direct hit to local government.

But there hasn't been much discussion about the much larger cost for local government: the cost of running the streetcar every year.

In 2011, consultants estimated streetcar operations would cost $4 million a year. RT recently did its own estimate and determined it could run the streetcar system for closer to $3 million a year.

Either way, operating costs will be a considerably bigger burden on locals every year, compared to the costs of building the system.

The tentative operations-funding plan, not yet put to paper, is that rider fares (likely $1 a ride) and advertising will cover about $1 million a year of costs. Another $1 million will come from the city of West Sacramento, where citizens already passed a sales-tax measure to help pay for construction and operation of the streetcar.

That leaves a $1 million to $2 million annual gap, which is likely to be shouldered by RT.

RT currently doesn't have enough money to restore basic bus service to the levels before the recession and deep cuts of 2010—cuts that fell harder on low-income neighborhoods. And anything RT spends on streetcars is money that it can't spend somewhere else. Neighborhood bus service, for example.

RT General Manager Mike Wiley says the agency can apply for a federal air-quality grant, worth about $1 million a year. But that would go away after five years at the latest. Wiley also wants to spend some of RT's share of the revenue from the California cap-and-trade program on streetcar operations. But local transit-equity advocates have promised to fight him on that plan, arguing that cap-and-trade money should be spent on bus or other service for Sacramento's transit-dependent communities.

It's ironic that streetcar's operations funding should be so uncertain so late in the game, given the enormous economic benefits that proponents say the project will bring. The economic consultant's report says local businesses will enjoy at least $1.3 billion in additional sales in the coming decades.

Sacramento State economics professor Rob Wassmer challenges that figure. “The revenue benefits are only valid if the new economic activity purported to occur comes from outside the respective city or county,” he explained.

In other words, much of the “new” economic activity the streetcar promises is really just money shifted from somewhere else, like Roseville or Natomas.

Likewise, the consultant's report estimates about $24 million in “new” sales and hotel taxes, but some portion of that is really just money that would be collected somewhere else in the city.

There is also an argument that streetcar will attract new riders, and thus benefit the public-transit system with new revenue.

City Councilman Steve Hansen and RT manager Wiley told SN&R that the streetcar would attract about 6,000 riders a day. That's about 2.2 million riders in a year, remarkable given that RT's entire light-rail system attracts just 14 million riders a year.

In fact, after RT opened its south line in 2003—six miles long and twice as expensive as the streetcar project—total system ridership increased by about 2 million people.

And some portion of the streetcar's “new” riders would have otherwise made a trip on a bus or light rail instead. Hansen says the number of riders “poached” from elsewhere in the transit system will be very small. But whatever the portion is, those are fares that RT will lose, and it's revenue that RT can't spend somewhere else.

Those impacts likely won't be reflected in the streetcar operations funding plan. And that plan probably won't be available to voters before they finish voting.