America's Cities Double Down on Trolley Follies

Streetcars continue to see cost overruns while failing to produce promised economic development.

When the St. Louis Loop Trolley was first proposed, the government estimated that the project would cost $43 million and be open for business by the end of 2016. Since then the project's costs have ballooned to $51 million, with service tentatively scheduled to start at the end of this year. And the Loop Trolley's chairman—businessman Joe Edwards—says the project will need another $500,000 from county taxpayers to stay viable.

"A year ago, I saw this as a boondoggle," St. Louis County Councilman Mark Harder told the St. Louis Dispatch. "Now it's a boondoggle plus 500 grand."

These cost overruns and delays are no doubt frustrating for St. Louis taxpayers. But they are hardly unique. A rash of recent streetcar developments have run into these troubles, thanks to faulty economic reasoning and an open faucet of federal dollars.

"Mayors of large urban cities are looking for economic development, and they thinkputting a streetcar will lead to economic development in certain corridors," says transportation analyst Baruch Feigenbaum of the Reason Foundation, the nonprofit that publishes this website.

Streetcar projects are keen to play up this angle too.

"Trolleys are a proven catalyst for residential, commercial and recreational development," says St. Louis's Trolley website. In Milwaukee, advocates for the currently-under-construction streetcar claim it will be "a critical element in the City's efforts to promote economic development downtown and along the route."

In fact, streetcars mostly succeed in shifting development, not kickstarting it. "It's not that you're creating new economic activity, it's that you are displacing it," says Feigenbaum.

Many of the cities currently building streetcars have had little trouble attracting development downtown. The Milwaukee Streetcar's own website mentions that $5 billion is either underway, planned, or completed in the city's currently streetcar-free downtown.

Edwards of the St. Louis Trolley board has been building and investing in highly successful bars, restaurants, and bowling alleys along the Delmar Loop since the 1970s—long before any streetcar was slotted to go there.

The availability of federal funds also helps fill the demand for street cars, says Feigenbaum.

Atlanta's streetcar project was awarded $47 million—nearly half the cost of the project—through the federal government's TIGER grant program (whose pitfalls Reason has covered here, here, and here). The Phoenix area's $186 million Tempe Streetcar, which started construction this summer, was approved for $50 million in federal funds. The St. Louis trolley is getting $33.9 million from the feds, about 76 percent of the project's initial cost projections.

Despite this federal assistance—or because of it—streetcar projects rarely stay within their cost projections. Atlanta's streetcar was projected to cost $72 million and to begin operations in May 2013. Instead it cost $98.7 million and opened in December 2014. Its operating costs have ballooned to three times the initial projections.

A project's purpose can shift over time too. Way back in 2002, D.C. signed off on a 7.2-mile line to service the low-income neighborhood of Anacostia. One thing led to another, and last year they instead opened a 2.2-mile streetcar line that services the bars along H Street.

The waste involved in those cost overruns is bad enough, but every dollar spent on transit also comes at the expense of other spending priorities.

For instance, while Milwaukee builds a streetcar at the cost of $51 million per mile of track, the city is considering cutbacks in cops, firefighters, and nurses, to deal with increasing pension and debt servicing costs.

Streetcar funds also come at the expense of more effective transit solutions. "Many cities are spending money on streetcars at the expense of their bus system," notes Feigenbaum, even though buses are cheaper, faster, and more flexible. To Feigenbaum, this underlines the fact that these projects are "really not about transportation—they're about economic development. But even the economic development is not really there, so what's the point?"