Deal with city gives Detroit’s light-rail backers green light
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By Bill Shea
Backers of a privately-funded $125 million light-rail line on Detroit’s Woodward Avenue have reached an accord with the city’s transportation department to move ahead with their version of the project.
The Detroit Department of Transportation’s proposed $371 million “Detroit Transit Options for Growth” included different types of trains and a center-of-street layout for Woodward, putting the two projects initially at loggerheads.
Now, the private plan, known as the M1 Rail, is likely to develop its 3.4 mile curb-side system as planned, and have it connect into the DTOG system north of the New Center Area — or whatever public train system that comes to fruition.
“This is in no way competition,” said M1 Rail CEO Matt Cullen said, adding that he’s been in talks with Norman White, the city’s CFO who was previously the MDOT director, a position that remains vacant.
Messages were left for White and for DDOT assistant director Lovevett Williams.
North of the M1 Rail’s terminus at the New Center area, the line is expected to converge into a higher speed center-of-street system that moves at a faster commuter rate with fewer stops, Cullen said.
That would match DDOT’s original plan, which proposes a line extending to the State Fairgrounds at Eight Mile Road.
Since the closely guarded M1 Rail project first came to light in Crain’s last year, it was obvious the two projects would have to reconcile because the DTOG plan included the same portion of Woodward.
However, the city’s plan relies on federal funding that hasn’t been applied for because Detroit doesn’t have the required matching money — leading to speculation about the project’s viability.
The nonprofit M1-Rail, which got needed legislative approvals and state operational funding mechanisms put in place in January, includes money from private backers, foundations and corporations, and will run a 12-stop route from Hart Plaza to Grand Boulevard in New Center, running past major business, cultural, medical, educational and sporting destinations.
THE MONEY
These are funding and cost projections for the M1 Rail project:
Funding
• Private donations/station sponsorships: $30 million
• Downtown Development Authority: $9 million
• Kresge Foundation: $35 million
• Utility/in kind: $4 million
• Vehicle lease/financing: $32 million
• New markets tax credits: $15 million
Total: $125 million
Costs
• Engineering: $6 million
• Construction: $65 million
• Vehicles: $32 million
• Contingency: $6 million
• Management/reserves: $12 million
• Net interest during construction: $12 million
Total: $125 million
Source: M1 Rail
Its financial and organizational backers include Penske Corp. founder Roger Penske Peter, who is chairman of the M1 Rail project; Peter Karmanos Jr., founder of Detroit-based software maker Compuware Corp.; Mike Ilitch, owner of the Detroit Tigers and Detroit Red Wings and co-founder of Little Caesar Enterprises Inc.; and Quicken Loans/Rock Financial founder Dan Gilbert, who’s the project’s co-chairman.
Cullen is also president and COO of Gilbert’s Rock Enterprises holding company.
The project is under the supervision of the nonprofit Downtown Detroit Partnership, a private-public partnership of corporate and civic leaders, led by chairman Roger Penske. It’s a key element, but separate, from a $10 billion three-county regional transit plan being developed by transit czar John Hertel for the elected executives of Wayne, Oakland, Macomb counties and Detroit.
The M1 Rail will eventually be turned over to the authority that runs the three-county system. Hertel orchestrated the secret meetings of the private backers for nearly two years before turning the project over the downtown partnership.
The M1 Rail project was discussed Thursday morning with reporters at the Detroit Athletic Club.
Here are some of the other highlights:
• The goal is to begin construction by the end of the year and have the line running no later than 18 months later. “It’s an aggressive timeline,” Cullen said. Survey crews are already at work.
• The project’s executives are in discussions with “two or three” financiers to assemble the money aspect of the rail system, Cullen said. He declined to reveal names, but said they would be banks that have an extensive local presence. Because the project’s funding is coming in over time, money will need to be financed up front.
• Ten individuals, foundations or corporations have donated at least $3 million each, Cullen said. (See related box, on the project’s funding and cost estimates.)
• The line will be in the second lane from the curb, preserving parking along Woodward and co-mingled with traffic. Stations will protrude by the curbside and will include advertising and branding. “This is very much a pedestrian-friendly system,” Cullen said. The cars, which will be a hybrid between modern street cars and traditional light rail, will typically carry 100-125 people, and more than 200 during major events such as ballgames.
• The service will be available from 6 a.m. to 11 p.m. with an estimated 75-cent toll that will be honor-based, meaning tickets are bought prior to boarding and are randomly checked during trips. There will be discounted tickets for students, seniors and frequent riders. Revenue fare is expected to account for just a small amount of the line’s operating funding, with the rest coming from state subsidy’s and taxes captured from development along the route, as authorized by the legislation signed into law in January.
• The project will require some level of approval from the city, and cooperation, but Cullen said it’s not completely certain yet that the city council would have to sign off the rail line. Woodward is a state highway, so the Michigan Department of Transportation has primary oversight, but the city has a role, too. He also said Mayor Dave Bing is aware of the project, and will be getting more in-depth briefing soon.
• There are no plans to seek federal stimulus money for the M1 Rail, but Cullen said it’s cost could be used as the local match portion of any publicly funded extension of the line and as part of the larger regional transit project.
• The rail company will attempt to broker a deal to piggyback another city’s production run of train cars, Cullen said. There are just a handful of light rail vehicle manufacturers, and car orders often are for dozens or hundreds, so Cullen said a manufacturer might be willing to add Detroit’s dozen or so units onto a pre-existing order. Notable manufacturers include Germany’s Siemens Transportations Systems, Bombardier Transportation in Montreal and Oregon Iron Works Inc. in Clackamas, Ore.
• The line’s route is still being studied. Because of the physical restrictions involved in a light-rail vehicle’s turning radius, it’s possible the line may switch at Campus Martius to Washington Avenue to form a loop that extends to Jefferson Avenue and back to Woodward, Cullen said. Another option is a train stopping, the driver walking to the other end of the vehicle and simply driving from the other end from a Y-shaped terminus. “We’re looking to understand what makes sense,” Cullen said.
• Henry Ford Hospital has expressed interest in a spur line connecting to the New Center Area stop.
Cullen also briefly addressed speculation that the private backers getting any direct financial gain from the project: No, they won’t. “It’s pure philanthropy by the private funders,” he said.
• The M1 Rail was originally called The Regional Area Initial Link, or TRAIL, but possibilities for new names are being studied.
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