The Seattle City Council took the first step yesterday to create a special tax district that would charge property owners $25 million to build a 1.3-mile streetcar line in the South Lake Union area.

The council voted 8-1 to form a streetcar tax district. Property owners now have 30 days to protest their preliminary assessments. If owners representing 60 percent of the assessments do not object, the council will draw up final streetcar tax bills and the district's boundaries.

Transportation Committee Chairman Richard Conlin said the council would likely finish that task early next year.

Property owners are being asked to pay $25 million of the project's $47.5 million construction cost. Proponents have stressed that few, if any, transportation projects in the country are funded to the same degree by the private sector.

City officials have compiled a list of about 700 parcels that would pay streetcar assessments. A city study shows that property owners near the streetcar line would see the value of their parcels increase by $69 million because of the project.

Owners would be required to pay 36 percent of that increased value for the streetcar. That amounts to about $8 million for the area's largest property owner, Paul Allen's development company, Vulcan, said Lyn Tangen, the company's director of government and community relations.

The streetcar project has stirred controversy in this year's mayoral and council elections. Several candidates have criticized the project as a frill that could siphon transit funds from other neighborhoods. Councilman Peter Steinbrueck cast the lone dissenting vote yesterday, saying the streetcar was not "among our highest transportation priorities."