June 18, 2014 at 3:59 pm

Some funding for Detroit's M-1 rail project in peril, but board plans to go forward

Without funding, M-1 Rail leaders say, the project along Woodward Avenue may have to be scaled back. (Max Ortiz / The Detroit News)

Washington— Detroit’s planned 3.3-mile $137 million Woodward Avenue streetcar project faces a $12 million funding shortfall, and Michigan members of Congress warn the project could be in jeopardy unless the Transportation Department gives it more money.

A two-page letter to Transportation Secretary Anthony Foxx obtained by The Detroit News on Tuesday warns that the project urgently needs additional grant money to proceed. But even without federal funds, officials of the so-called M-1 project says it would survive — but concede it might have to be scaled back.

The May 1 letter, which has not previously been made public, discloses that Detroit applied for a supplemental $12.2 million grant from the Transportation Department’s TIGER grant program. The project received $25 million in federal funds from the program in January 2013.

“Without the requested $12.2 million TIGER grant, this important project will be delayed indefinitely, and we fear the resulting costs could make the project unaffordable,” said the letter signed by Sens. Carl Levin of Detroit, Debbie Stabenow of Lansing and Reps. Sander Levin of Royal Oak, John Dingell of Dearborn, John Conyers of Detroit and Gary Peters of Bloomfield Township. The lawmakers, all Democrats, urged Foxx to “award a TIGER grant to close the funding gap.”

TIGER stands for Transportation Investment Generating Economic Recovery. It is a discretionary grant program enabling the transportation department “to invest in road, rail, transit and port projects that promise to achieve critical national objectives,” its website says.

Since 2009, Congress has dedicated more than $4.1 billion for six rounds to fund projects that “have a significant impact” on the U.S., a region or a metropolitan area.

The Michigan M-1 letter also was sent to White House chief of staff Denis McDonough, Obama senior adviser Valerie Jarrett and Don Graves, the White House point person on Detroit — a sign that Michigan Democrats are pulling out all the stops to help keep the project on track.

“I’ve had conversations with everybody in the administration,” Levin said.

The members of Congress called the project a huge boost for economic development. “This project sets a new precedent for regional cooperation and is a game-changer for a city in the midst of a great financial crisis,” the letter said. “We believe construction of the M-1 Rail from downtown to midtown Detroit will bring people from all over the world to Detroit’s business corridor and catalyze new economic opportunities for Detroit and beyond.”

Matt Cullen, CEO of M-1 rail, said in a Detroit News interview Tuesday that the M-1 board of directors voted this month to move foward with a groundbreaking, despite the roughly $12 million shortfall.

He said the group planned to have a groundbreaking in about 30 days, after it seeks final permits from the Detroit City Council to start construction. The permitting action could take place as early as next week. Cullen said the project should take about two years.

Not proceeding now could put the project at risk, Cullen said, even without a decision on the additional funding sought. The project could lose the $8 million in New Market Tax Credits it received from the Treasury Department.Cullen said the Transportation Department is expected to make a decision on funding by September. While he called the additional money critical, Cullen said the project still could proceed if it had to, by dipping into the funds M-1 has raised to cover the estimated $50 million in operating costs over the first decade of operation.

Cullen said a failure to win further federal support could require a redesign of the project and scaling back some elements, including perhaps buying one less car.

“We said to Secretary Foxx, ‘Look, we need some help,’ ” Cullen said, emphasizing it would be extremely difficult to go out and raise additional operating funds.

A spokeswoman for Foxx didn’t comment.

The M-1 board members are adamant about starting construction soon. “If we don’t go now, then we really are in huge trouble,” Cullen said.

If the federal government says no, they would find a way to proceed.

“It’s not something that we want to do,” Cullen said. But he added: “I don’t want to minimize how important” the $12.2 million TIGER grant is to the project.

Many foundations and big corporate donors that are backing M-1 also have been hit up for funds as part of the grand bargain to help speed Detroit’s exit from bankruptcy.

Cullen wouldn’t confirm a report that the M-1 project lost a major donor. “We’ve had funders move in and out,” he said.

He attributed the deficit to a variety of factors, especially a lower-than-expected amount from the New Market Tax Credit, a competitively awarded program run by the U.S. Treasury Department. Cullen said the program expected $15 million, but got about $8 million.

Megan Owens, director of the transit advocacy group Transportation Riders United, said she’s always had concerns the private funds for the M-1 project would be difficult to secure, and “that there’s always a risk that verbal commitments may not come to pass.”

“It would certainly be devastating for the project to fall apart at this point,” said Owens, who is on the M-1 citizens advisory committee. “There’s been so much excitement and so much investment put into this project.”

Cullen noted the nonprofit M-1 project has “had its twists and turns” since proposed in 2007. The project had been set to break ground in late 2013 and open in late 2015. Cullen said the project will now open by the end of 2016 — assuming no big production delays like an extremely hard winter, Cullen said.

General Motors Co., Chrysler Group LLC, the Ford Foundation, Kresge Foundation, Wayne State University, Illitch Holdings, Quicken Loans, Henry Ford Health System, Blue Cross Blue Shield of Michigan, the Detroit Medical Center and Wayne County are among the big financial supporters of the project, as is the Michigan Strategic Fund.

Cullen said the nonprofit has also gone back to prime funders Roger Penske, Dan Gilbert and the Kresge Foundation seeking additional support.

dshepardson@detroitnews.com

Matt Cullen, M-1 Rail CEO, says the project has had 'twists and turns.' (John T. Greilick / The Detroit News)