South Lake Union streetcar likely a go despite concerns

The projected number of riders and sponsors for a South Lake Union streetcar may be overstated, and the project contains multimillion-dollar risks for taxpayers, according to a Seattle City Council analysis released yesterday.

The analysis represents the first report critical of Mayor Greg Nickels' financing plan for the streetcar, estimated to cost $47.5 million to build and $1.5 million a year to operate.

Although analysts raised several concerns, none are likely to derail the project, said Councilman Richard Conlin, chairman of the council's transportation committee.

"Their job is to tell us what we should be worried about and our job is to determine how worried we should be. I think we're in pretty good shape," Conlin said.

The streetcar appears politically unstoppable at this point, he said, as the mayor's plan satisfies conditions the council imposed on the project, such as a ban on tapping the city's general fund — money used for parks, public safety, libraries and basic services.

A majority of the council has signaled support for the streetcar, with even Nick Licata, a streetcar skeptic, admitting that his colleagues are likely to approve it.

A committee vote is likely next month.

Starting in 2007, the streetcar would run from Westlake Center to the Fred Hutchinson Cancer Research Center on the southeast shore of Lake Union and back. Nickels has said private property owners in the area, including The Seattle Times, would pay $25 million of the streetcar's cost because their land values would increase. The owners, in what would be called a local-improvement district, would pay a special tax.

An appraiser hired by the city has estimated that the streetcar line would increase nearby property values by $70 million to $80 million.

Council analysts highlighted several concerns about the financing plan the mayor released two weeks ago:

• Only 29 percent of the streetcar's $47.5 million construction tab has been secured.

• Setting up and administering the special tax district could cost up to $4 million, an expense not included in the mayor's plan.

• Ridership projections appear optimistic. Nickels' consultant predicted the streetcar would initially draw 30 to 35 riders an hour, a number that would increase 6 to 10 percent a year. Council analysts said they couldn't verify those assumptions, particularly for the first two years.

• Estimates of what organizations would pay to sponsor the streetcar system and stations, through naming rights or other means, are also rosy.

Based on research on streetcars in Portland, Tampa, Fla., and Little Rock, Ark., Nickels expects to sell 10-year system and station sponsorship rights for $3 million. But council analysts found those cities received far less.

In response to the analysts' concerns, Conlin said that if property owners come up with $25 million through a special tax, the construction gap would shrink to $6 million, which the mayor hopes to close with federal and regional grants.

Nickels adviser Michael Mann said the council analysts appeared to overstate the costs of establishing a special tax district. The mayor will ask property owners to pay those costs, Mann added, likening them to closing costs in buying a house.

As for ridership, Mann said the mayor's consultants insist their projections are conservative.

He also stressed that the mayor's plan contains financial cushions — such as a $4 million contingency budget — that protect against revenue shortfalls or cost overruns.

Said Conlin, "At this point there are enough contingencies to balance the risks."

Bob Young: 206-464-2174 or byoung@seattletimes.com