The Sacramento Streetcar Project

An Eye on Sacramento Report January 13, 2015

“Start Digging a Hole”

"In the world of civic projects, the first budget is really just a down payment. . . The idea is to get going. Start digging a hole and make it so big, there’s no alternative to coming up with the money to fill it in.” ---Willie Brown, former California Assembly Speaker, from his July 28, 2014 S.F. Chronicle column.

For further information on this EOS Report, please contact:

Craig K. Powell, President Dennis Neufeld, Director of Research (916) 718-3030 - [email protected] (916) 539-1054 - [email protected]

For further information about Eye on Sacramento, please contact:

Lisa Garcia, Vice-President, Community Outreach Director Eye on Sacramento, 1620 35th Avenue, Suite K, Sacramento, CA 95822 Phone: (916) 403-0592; E-mail: [email protected]; Website: www.eyeonsacramento.org Eye on Sacramento is a 501(c)(3) non-profit organization 1 TABLE OF CONTENTS Page

I. EXECUTIVE SUMMARY 4

II. MESSAGE FROM PRESIDENT OF EYE ON SACRAMENTO 7

III. PROJECT DESCRIPTION 9 - Proposed Streetcar Route 9 - Estimated Construction Costs and Funding 10

IV. STREETCAR RESURRECTION 10 - Sacramento's Historic Streetcar 10 - The Modern Streetcar Movement 11 - Early Streetcar Leadership by West Sacramento 11

V. CAUSES FOR CONCERN 12 - Public Opinion is Coalescing Against the Streetcar Movement 12 - Revival or Dying Fad? 13 - Ridership and Service Plan 14 - Streetcars vs. Buses 14 - Innovative Bus Designs May End Streetcar's Monopoly on "Cool" 15 - Absence of Destinations 16 - Troubling Similarities to Tampa and Little Rock Streetcar Systems 16 - Union Pacific Track: Roadblock to Expansion East of 19th Street 17 - West Sacramento Bus Riders Will Be Forced to Transfer 19 - West Sacramento Service Will Be Cut in Half 20

VI. TRAFFIC AND OPERATIONAL ISSUES 21 - Worse Traffic on I, J and L Streets 21 - Meet the Traffic Problems of 2018 22 - Vulnerability of Light Rail to Streetcar Delays 25 - Tower Bridge Crossing 26 - The $150 Million Turning Lane 27 - Problems with Arena Service 28 - Safety, Security of Streetcars: Will It Be Any Better Than Light Rail? 28 - Streetcars and Bicycles Are Not Mixing 29

VII. ECONOMIC DEVELOPMENT IMPACTS 29 - Impacts Will Vary by District 29 - Economic Projections of Higher Property Values: Are They Credible? 30 - Construction Impacts on Merchants and Businesses: Mitigation? 31

VIII. PROPERTY TAX ASSESSMENT & FISCAL IMPACTS 31 - Imposition of Tax Assessment is a Two-Election Process 31 - Apparent Major Change in Method of Calculating Assessments 32 - Proposed Property Owner Ballot: A Blank Check? 32 - The Truth About the 40-Year Duration of the Property Tax Assessment 33 - Why the Tax Assessment is Much, Much Greater Than $30 Million 34 2 Page

- The Role of GO! Streetcar and Its Sponsor, Friends of Light Rail & Transit 34 - Arena Developers' Sweetheart Deal on the Streetcar Tax 35 - Sacramento Owners vs. West Sacramento Owners: A Question of Fairness 36 - Special Benefit to West Sacramento's Triangle District Developers? 36 - The Extraordinarily High Cost of the Streetcar Facility: $15.9 Million 37 - Worrisome Lack of Conditions to Use of Property Tax Assessments 38 - Cost Overruns After Construction Has Begun: Who Will Be Responsible? 39 - Will Contingency Reserves Be Adequate to Cover Construction Cost Overruns? 39 - The Certainty of Annual Streetcar Operating Deficits and Sacramento's "Fiscal Cliff" 40

IX. FUTURE CONCERNS 41 - Challenge of Coordinating Six Governmental Jurisdictions 41 - Lack of Budgeting for Car Replacements 42 - City's Fanciful Plan to Build Nine Additional Streetcar Lines 43

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I. EXECUTIVE SUMMARY

Key Findings

Impacts of Streetcar Project on Economic Development

 After a review of the experiences of other U.S. cities and an examination of the proposed Sacramento streetcar system, we've concluded that streetcars would not increase mobility, cut commute times or reduce traffic congestion and would be less cost-effective than buses due to their higher capital costs.

 These days, streetcars are being promoted as a catalyst to development and economic growth. However, we find no credible evidence that establishes that streetcars are a significant factor in stimulating development. While promoters of streetcars cite instances of increased development in areas of some cities in which streetcar lines have been built, they have failed to prove "causation," that is to say, that streetcars were the actual cause of the concurrent building development.

 In the frequently cited case of Portland, development along its streetcar line was greatly assisted by significant tax and other government subsidies that were extended to developers.

 But Sacramento cannot currently offer developers the same generous package of development incentives that local government in Portland was able to provide to developers of property near their new streetcar line. Consequently, we don't place much credence in economic forecasts that predict that Sacramento will experience development increases comparable to what Portland experienced when it installed its streetcar line.

 To the extent that streetcars do serve as a catalyst to economic growth, we believe that essentially the same economic impact can be secured at a fraction of the proposed cost by, instead, purchasing and deploying redesigned and reengineered modern transit buses that are virtually indistinguishable in appearance and function from modern streetcars (a picture of such a modern transit bus appears on page 15 of this report).

 Based on cancellations of streetcar projects and overruns of both construction and operating costs experienced by other U.S. cities, and our review of studies, reports and media accounts, it appears that public opinion - and the opinion of many transit experts - is shifting away from the modern version of the streetcar. In fact, it appears that much of the impetus for building such systems has been the willingness of the federal government in recent years to fund half of the costs of construction, which, in Sacramento's case, is expected to amount to $75 million.

 In other cities that have built streetcars, some local merchants and businesses have experienced major disruptions to their businesses during the 24-month construction period involved in building a streetcar system. We have seen no indication that the project will offer assistance to help such impacted businesses.

4 Impacts of Streetcar Project on Traffic

 Based on our detailed review of every almost element of the proposed streetcar system, we conclude that it would increase traffic congestion on I, J and L Streets and will create major traffic problems near the I-5 on-ramps and off-ramps at 3rd and J Streets, as well as problems on the Tower Bridge and at the intersection of J and 19th Streets.

 The streetcar is slated to use existing Light Rail tracks on some streets in Downtown, including 7th and 8th Streets and one block of H Street. Since streetcars are much slower that Light Rail trains, there are real concerns that streetcars will cause back-ups and delays for Light Rail trains, which, at 360-feet long, can clog up intersections, trip traffic signals and aggravate congestion at Downtown intersections.

The Special Tax Levy

 Downtown and Midtown property owners are being asked to cast advisory ballots on a proposed special tax levy on their properties without the benefit of having correct or complete information on important details of the tax levy, bond financing costs or the streetcar project itself, including financial risks and impacts of the project.

 Media reports on the streetcar project have included erroneous information about the amount of the total taxes that would be paid by property owners and how long such tax payments must be made.

 The total assessment will not be $30 million as has been erroneously reported, but will, instead, be 20% of the total costs of constructing the streetcar project (estimated to be $150 million), plus interest and other financing costs on Mello-Roos bonds that will have a maturity of up to 40 years (not 30 years, as has been reported in the media).

 The bonds will finance a $30 million cash contribution to the construction costs of the streetcar project. Additional amounts will be borrowed to cover prepaid bond interest, bond reserves and issuance costs, up to a maximum authorized borrowing of $38 million.

 If the full $38 million is borrowed, the total interest and other financing costs on the bonds could amount to as much as $58 million, depending on interest rates, bond maturities, payment and other terms, which could bring total tax payments by property owners to pay off the bonds (including financing costs) up to as much as $96 million. It is more likely, however, that total tax payments will be closer to $75 million.

 Property owners will pay a tax rate that's based on how close their property is to the proposed streetcar line, with those parcels located within one block of the line paying the highest rate, those within two blocks paying the second highest rate and those within three blocks paying the lowest rate.

 Commercial and office property owners will pay a rate based on both the square footage of their land and the square footage of their buildings. For example, a commercial office building located within two blocks of the line would pay an annual rate of $0.040 cents for each sq. ft. of land and a rate of $0.112 cents for each building sq. ft. Owners of residential property will pay a rate based on the number of units on the property. 5 Special Tax Break for Arena's Owners: $10,000,000 Estimated Tax Subsidy

 Owners of the new Downtown Arena, however, will be paying much lower tax rates than other commercial property owners. They will pay no tax at all on their land and will pay a $0.040 rate on most of its building square footage, a rate 64% lower than the rate paid by all other commercial property located the same distance from the streetcar line ($0.112).

 Based on media reports, it appears that Arena owners will be paying approximately $250,000 less each year than they would otherwise be required to pay if the Arena was taxed at the same rate as similarly situated commercial property. Over 40 years, tax savings from their discounted tax rate will amount to an estimated $10,000,000 to Arena owners.

 This major tax subsidy will be made up by all other property owners in the district who will pay higher tax rates than they'd otherwise have been required to pay had the Arena not been given this special tax break. Consequently, Eye on Sacramento (EOS) believes that this special tax break is grossly unfair to other Downtown and Midtown property owners. City taxpayers are already providing the Arena owners with hundreds of millions of dollars of subsidies. Further subsidies are unnecessary, wasteful and injurious to other property.

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To: Sacramento City Council, Downtown/Midtown Property Owners, Sacramento Residents and Members of Local Media

In its work as a civic watchdog, Eye on Sacramento is, by necessity, quite selective in the matters it chooses to review or investigate. We tend to focus on civic matters which are of high public importance, but which are not receiving adequate scrutiny by media, government or concerned citizens. We try to shed light on important, but overlooked corners of local government, premised on the sage advice of Justice Louis D. Brandeis that "sunlight is said to be the best of disinfectants."

The proposed Sacramento/West Sacramento streetcar project certainly meets our criteria for review. Owners of property in Downtown and portions of Midtown Sacramento are being asked by the City of Sacramento this week to cast an advisory vote on whether they wish impose on themselves tax assessments for 40 years equal to 20% of the project's total costs, plus bond interest, to help build a 3.3 mile streetcar system at an estimated total cost of $150 million.

However, property owners and the public are almost entirely in the dark about critical details of the project, including details such as:

 Who would operate the streetcar system?  Who would bear responsibility for cost overruns and operating deficits?  Would the annual property tax assessment last for 30 years or 40 years?  The City and the media have been publicly stating that the property owners' contribution would be $30 million, but that figure grossly understates the total tax levy as it doesn't include 30 to 40 years of bond interest. What would the real total cost to property owners be?  How (and who) would pay for streetcar replacements (at $6 million each)?  Are all owners paying their fair share of the costs or are some owners getting sweetheart deals?  What impact will streetcars have on Downtown/Midtown traffic and mobility?  How much would streetcar riders be charged, if anything?  How will the system's operating deficits impact Sacramento's already troubled general fund?  How reasonable are the assumptions of ridership and operating costs?  Are there better transit alternatives available?  What existing physical restraint limits eastward expansion of the system past 19th Street?  What impacts would construction of the streetcar line have on merchants and businesses?  How legitimate are predictions that streetcars will lead to growth and higher property values?  What experiences have other cities had with new streetcars systems - beyond Portland?  Why are transit experts increasingly souring on streetcar systems as a form of transit?

In this report, we provide answers to some, but not all of these questions. Why not all? There are three reasons. First, the City of Sacramento chose to provide property owners with only a month's prior notice, over the busy holiday season, of its advisory vote of property owners, which has deprived owners, the media and EOS of adequate time to research, compile and disseminate key information about the project, as well as time for owners to communicate with one another and debate the issue. 7 Sacramento City Council, et al January 13, 2015 Page 2

Second, Sacramento city managers failed to provide EOS access to several city documents relating to the streetcar project, while limiting EOS's access to a key city staffer in a position to answer such questions, marking the first time city managers have failed to fully cooperate with an EOS study.

Third, we believe that answers to several of these questions simply do not exist because local municipal and transit officials have either not yet addressed them or not yet performed the due diligence and preparation work necessary to answer them, leaving property owners with a dearth of information on which to base their voting decisions.

Despite these impediments, a team of EOS researchers have worked with great intensity over the past three weeks to research, analyze, compile and distribute this full spectrum report on the streetcar project. We are pleased that we've been able to deliver the report's Executive Summary, together with a link to our full report (available at www.eyeonsacramento.org), to property owners before they receive their ballots from the City of Sacramento.

EOS is not recommending how property owners should vote on the assessment tax proposal. That is not our role. Our job is to educate voters, trusting them to make the choice that is right for them.

Finally, we note that supporters of the streetcar project have scheduled an informational meeting for property owners from 5:00 to 6:30 p.m. on Thursday, January 15, 2015, at Capitol Dime, 1801 L Street. We understand that city officials involved in the streetcar project will be available to answer questions regarding the project and the tax levy. Property owners may wish to attend and ask city officials some of the questions that remain unanswered.

Sincerely,

Craig Powell, President Eye on Sacramento January 13, 2015

E-mail: [email protected] Phone: (916) 718-3030 Website: www.eyeonsacramento.org EOS is a 501(c)(3) non-profit organization

8 III. PROJECT DESCRIPTION

Proposed Streetcar Route

The proposed Sacramento Riverfront Streetcar would be a $150 million project with half of its startup costs funded by the Federal Transit Administration. The project would add 2.9 miles of track and share some track with Sacramento's existing Light Rail system (on 7th and 8th Streets and on H Street) to form a 3.3 mile route. It would have 25 stops, each placed about four blocks apart. Estimated time to circumvent the route: 22 minutes.

Streetcars would be scheduled to arrive every 15 minutes during the day and every 20 minutes at night and on weekends. Its projected average speed would be 9 miles/hour. Key destinations would include the West Sacramento Civic Center, Raley Field, Tower Bridge, the Amtrak depot, K Street Mall, and the Sacramento Convention Center. To the east, it would extend to 19th Street in Midtown..

On the West Sacramento side, an additional branch is proposed down Riverfront Street south of Raley Field to a proposed streetcar maintenance facility. If funded, the project is expected to be operational by 2018, with total annual operating and maintenance costs of $4.0 million, an estimate that has not been updated since 2012. 1 See the section entitled "The Certainty of Annual Streetcar Operating Deficits and Sacramento's 'Fiscal Cliff'" below.

Source: http://www.riverfrontstreetcar.com/where-will-the-streetcar-go/

1 Sacramento Streetcar System Plan, pg. 44 (2012). http://portal.cityofsacramento.org/~/media/Corporate/Files/Public- Works/Publications/Transportation/Planning-Projects/Streetcar-Report.pdf 9 Estimated Construction Costs and Funding

According to the City of Sacramento, the $150 million estimated cost of constructing the streetcar system (an amount $20 million higher than the 2012 cost estimate) is proposed to be funded with contributions from the following sources:

Federal Transit Administration $75,000,000 Downtown/Midtown Property Owners 30,000,000 West Sacramento Measures U and V 25,000,000 State of California 10,000,000 County of Sacramento 3,000,000 City of Sacramento 7,000,000 Total $150,000,000

The city is proposing that a community facilities district ("CFD") be formed in the Downtown and Midtown areas that would be served by the streetcar line. Under the plan, property located within three blocks in any direction of the proposed streetcar route would become part of the CFD and property owners would pay an annual special tax levy equal to 20% of the total costs of building the streetcar project. Because property owners will, in addition, required to pay interest on bond debt, the total amount of their tax levy will greatly exceed the "$30 million" figure identified by the City and local media as the property owners' "contribution" to the project. The tax payments would continue for 40 years. (See the sections entitled "Why the Total Tax Assessment is Really Much Greater Than $30 Million" and "The Truth About the 40-Year Duration of the Property Tax Assessment" below).

The amount of the annual assessment on each parcel would vary with the distance of the parcel from the streetcar line, with those parcels located within one block of the line paying the highest assessment, those parcels within two blocks paying the second highest assessment and those within three blocks paying the lowest assessment. (But see the discussion below under the section entitled "Arena Owners' Sweetheart Deal on the Streetcar Tax").

Recently a 4th Zone was added to the financing district's boundaries, which includes most of the Downtown Railyards land up to North B Street. However, it appears that parcels in this 4th Zone will have no Special Tax Levy rate assigned to them. A summary of the "Special Levy Rates" to be paid by property owners in each of the zones appears in the section entitled "Arena Owners' Sweetheart Deal on the Streetlight Tax" below.

IV. STREETCAR RESURRECTION

Sacramento's Historic Streetcar

Historically, Sacramento was an enduring streetcar town. From as early as 1860, Sacramento had its streetcar precursor, the horse-drawn passenger-wagon called the omnibus, which shuttled passengers from the Central Pacific station at Front and K streets to nearby hotels. The omnibus was the first passenger transit vehicle, a kind of ‘stretch’ stagecoach, seating up to 30 people, some even on the roof.

Upon completion of the intercontinental Central Pacific Railroad in 1869, demand for citywide public transportation increased dramatically. In 1870 omnibuses were replaced with horse-pulled streetcars, gliding along steel rails owned by a private firm, the City Street Railway. Fares were five 10 cents. By 1891 the cars had became electrified with overhead lines which made them faster and cheaper to operate. Power was provided mainly from the Folsom Hydroelectric Power House. PG&E took over its operations in 1906, later selling its streetcar operations to Pacific City Lines in 1943.

In the 1940s, after World War II, the returning soldiers, aided by a strengthening national economy, led to ever greater reliance on the auto for daily travel needs, while bus service emerged as the faster and more flexible means for public transportation. Buses were faster, less noisy, caused fewer traffic tie-ups, and provided more flexibility for route changes and express services. Trundling along at eight miles per hour, streetcars could not compete with the speed and flexibility of bus services, and the familiar trolley cars became public transportation’s historic artifacts. By 1947, Sacramento’s full-scale streetcar operations ended.

The Modern Streetcar Movement

On November 15, 1962, the last Sacramento Northern interurban train crossed the Tower Bridge, a cause for celebration at the time. Almost twenty-five years later, street railways were returned to Sacramento with the March 12, 1987 opening of the Regional Transit Light Rail system. Light rail has now been established in over a dozen North American cities.

Early Streetcar Leadership by West Sacramento

Visions of the streetcar’s return to downtown Sacramento became serious in the early 1990s when local trolley enthusiasts began exploring streetcar routes and funding sources. Discussions gained momentum when West Sacramento, in 2002, began preliminary discussions for their own system, servicing the riverfront, Raley Field and the Civic Center. By March 2006, West Sacramento had prepared its own funding study for a streetcar project. Later in 2006, West Sacramento, in cooperation with other partner agencies (City of Sacramento, Regional Transit, and Yolo Bus), authorized the preparation of a streetcar study encompassing both cities. This 2007 study, “Downtown Riverfront Streetcar,” provided additional momentum for the project.

In the November 2008 election, Measure V was passed by West Sacramento voters, extending a one-quarter percent sales tax for an additional 20 years. In the same election, voters passed by 65 percent a companion measure, Measure U, advising that Measure V funds should be spent on flood control and the streetcar system. With this key funding commitment, West Sacramento continued its leadership for a fledging streetcar system.

Following streetcar-friendly changes to federal grant rules in 2009, local leaders from across the country have increasingly begun making the pilgrimage to Portland, to see the nation's premier modern streetcar project, and to hear how streetcars might work in their city. What were the changes in federal grant rules that paved the way for greatly increased streetcar funding? Under the Bush Administration, funding rules made cost-effectiveness a paramount consideration. Transportation officials under the Obama Administration down-played the importance of cost-effectiveness, paving the way for streetcar projects to receive federal funding based largely on their projected economic benefits.

In 2010, West Sacramento’s $25 million federal grant application for streetcar funding was turned down by the Federal Transportation Administration (FTA). But West Sacramento persevered and, with implementation of the 2009 streetcar-friendly changes to federal grant rules, were successful in getting a preliminary go-ahead from FTA for the two-city project in May 2014. FTA instructed the local entities to choose a preferred streetcar route, conduct an environment review, and provide cost 11 estimates with a financial plan. Answers to these three requests are expected in early 2015, according to media accounts.

V. CAUSES FOR CONCERN

Public Opinion is Coalescing Against the Streetcar Movement

During 2014, a surprising body of public opinion nevertheless began to coalesce against the streetcar movement. A glance at the headlines illustrates the change in sentiment:

"Streetcars: A Momentary Lapse of Reason"

-- Bruce Nourish, Seattle Transit Blog, 7/29/14

"Rolling blunder: federal subsidies have inspired some silly transit projects"

-- The Economist, 8/9/14

"Overall, U.S. Streetcars Just Aren't Meeting the Standards of Good Transit"

-- Eric Jaffe, Citylab, 9/3/14

"The biggest folly in transportation: streetcars to nowhere"

-- Jacob Anbinder, The Week, 10/17/14

"Development Myths Drive Streetcar"

-- Eric Fruits, Portland Tribune, 12/6/12

"A Streetcar Not Desired? Efforts to Resurrect a Classic Type of Transit Have Derailed"

-- Kevin Robillard, Politico, 12/30/14

"A Streetcar Named Confusion"

-- Charles Chiep, Governing, 12/18/14

"Streetcar Ridership, Revenue Still Off Track"

-- Danny Westneat, Seattle Times, 10/10/14

"Meet the Worst Transit Project in America [Detroit Streetcar]"

-- Matthew Yglesias, Vox.com, 7/25/14

12 Revival or Dying Fad?

Since the launch of its first modern streetcar line in 2001, In a piece entitled "A streetcar Portland has been the exemplar for streetcar proponents. But not desired," Kevin Robillard citizen support is reportedly on the decline. A December 2014 neatly summarizes the change in report by Portland's city auditor has cast doubt on the supposed outlook and traces its origins: economic development benefits of streetcars. At the same time, the academic and professional community has begun to question "The Obama administration whether the streetcar trend has yielded any genuine has sent more than a half- transportation benefits. billion dollars to cities and counties in hopes of reviving It's not just the critics who are having second thoughts about the venerable American streetcars. High profile cancellations of streetcar projects streetcar. But the renaissance marked 2014, first in San Antonio, then in Austin, followed is threatening to run off the shortly by Arlington. Meanwhile, budget overruns in Cincinnati, tracks — imperiled by cost construction delays in Kansas City, and difficulties in testing in overruns, lower-than- Washington, DC, have turned the political climate from one of expected ridership in some triumph to one of finger-pointing. places and pockets of local resistance. With the GOP recapture of Congress, local officials across the country are scrambling to get their streetcar projects into the "Unlike with the federal grant pipeline. Yet with the federal spigot potentially administration’s high-profile drying up in the next session of Congress, ambitious plans for controversies over sprawling streetcar networks were probably never more in doubt. Obamacare, Common Core and Dodd-Frank, the GOP isn’t leading the charge... Instead, transit-supporting urbanites have begun questioning the projects’ value."

Source: Politico, 12/31/14

13 Ridership and Service Plan

Official ridership estimates for the Sacramento Riverfront Streetcar are 4,500 to 5,800 boardings per day.2 A comparison to peers suggests these figures are optimistic, but not unprecedented. Several attributes of the streetcar plan nevertheless emerge as worrisome:

 Lack of any high-ridership destinations to pair with Downtown Sacramento  Inability to expand east of 19th Street due to UPRR tracks and redundancy with existing buses  West Sacramento bus riders forced to transfer  West Sacramento service cut in half to serve new housing on Riverfront Street

Streetcar ridership forecasts also fail to discern between new riders and riders that already use transit today. It is therefore quite plausible that a streetcar could, itself, achieve high ridership, but that overall transit ridership in the city could be unchanged.

Streetcars vs. Buses

There is a spirited debate in transit circles these days over the relative benefits of building streetcar systems vs. expanding bus services to achieve goals of improving transit, operational efficiency and enhancing development opportunities. The potential of streetcars to serve as catalysts for development are discussed under the section entitled "Economic Projections of Higher Property Values: Are They Credible?" below.

The usefulness of streetcars as a mode of transit has come in for intense criticism from transit specialists and advocates in recent years, particularly those streetcar systems - like Sacramento's proposed system - where streetcars do not travel in designated lanes and which lack signal override authority over red lights at intersections (unlike our Light Rail system, which has signal override authority in some areas). Streetcars without designated lanes and signal override control must travel within street traffic and, as a result, cannot travel faster than a bus. And because streetcars cannot move around obstacles (i.e. a stalled car, an accident or a roadway impediment) or avoid cars waiting at intersections to make right-hand turn as a bus can, streetcars are actually slower than buses.

In a December 6, 2012 article in the Portland Tribune, Portland State University economics professor Eric Fruits said:

"Modern streetcars have become the pleasure boats of public transit: flashy, expensive and slow. Today, Portland’s streetcars quietly glide through the streetscape at a leisurely pace. Portland’s new Central Loop covers 3.3 miles in about an hour and a half. At 2.5 miles an hour, that’s slower than most people walk." Joseph Rose, reporter for a Portland media outlet, actually tested whether he could walk faster than the Portland streetcar travels. In the nonscientific contest, the walking reporter won with an average walking speed of 3.25 mph.

Streetcars also cannot be redeployed to other streets in response to changes in transit priorities, while buses can easily be.

2 Sacramento Streetcar System Plan, pg. 41 (2012). 14 Streetcars also fail on another important test of mobility: they don't tend to move people from home to work and back again. Operating on short, closed-in urban loops, streetcars tend to merely circulate people in an urban core, rather than help folks get to work and back home again.

In terms of cost-effectiveness, the much higher capital costs of installing a streetcar system (at a typical cost these days of $50 million per mile) compared to the relatively low cost of buying buses makes streetcars the more costly alternative. Streetcars themselves are extremely pricey at around $6 million per car, in part, because they are built via custom order, while buses are purchased off-the-shelf. As one observer put it, until the small number of streetcar manufacturers (there are just two in the U.S.) begin to sell streetcars in volume and limit customer choices to "paint color and carpet," the price of streetcars will remain very high.

With buses beating out streetcars in terms of transit value and cost effectiveness, what is the appeal of streetcars? It's heir perceived value as catalysts for development, primarily due to the public perception that streetcars are "cool" and "hip" in comparison to buses and help attract cool and hip- seeking young professionals to a community, a highly valued demographic for cities seeking growth.

Innovative Bus Designs May End Streetcar's Monopoly on "Cool"

With the advent of bus rapid transit systems (BRT) and innovations in the design of modern buses, the streetcar's current status as the cool kid on the transit block may be coming to a close. New bus designs are starting to make buses indistinguishable in appearance from streetcars, at a fraction of the capital cost. Entrances are being lowered closer to street level, benches removed to add standing passenger room, new engine designs are quieter, fare kiosks are being located at station stops and exterior designs replicate the appearance and curvature of modern streetcars design. Future users of Denver's proposed new BRT line may be hard-pressed to determine whether they are boarding a modern bus or a streetcar.

So if the key justification for putting in a streetcar system is not its transit value, nor its cost-effectiveness, but because it is cool and attracts the young professionals that help drive local development (a stretch), why not, instead, revamp Sacramento's bus system by buying the latest, coolest design in modern buses? If people can't really discern the difference between such buses and streetcars, we should be able to capture the potential catalytic value of streetcars at a fraction of their capital cost.

15 Absence of Destinations

Streetcars in Portland and Tucson have both attracted significant ridership.3 In Tucson, the 3.9- mile streetcar line provides a direct route between the University of Arizona (42,000 students) and Downtown Tucson. The Portland streetcar similarly provides a direct north/south link from Downtown Portland to Portland State University (29,000 students). Both routes are transit arteries, providing service to an established group of everyday pass-holders.

Unfortunately, California State University, Sacramento, would remain frustratingly out of reach for Sacramento streetcar riders, as Union Pacific railroad tracks at 19th Street would mean the end of the line, now and for the foreseeable future, as discussed in the following sections.

Troubling Similarities to Tampa and Little Rock Streetcar Systems

Streetcars in Tampa and Little Rock focus more on cultivating neighborhood charm and circulating visitors amongst entertainment and cultural amenities, with far fewer riders to show for it. The Tampa streetcar, which averages fewer than 1,000 riders per day, serves a nearby historic district, hotels, waterfront attractions, and a convention center. The Little Rock streetcar, which averages fewer than 250 riders per day, runs across the Arkansas River to connect Little Rock with North Little Rock. Short circulation loops on either side of the river serve such civic destinations as a ballpark, a basketball arena, and a convention center.

The Sacramento streetcar would use higher-capacity modern streetcar vehicles and would serve at least a middling travel market, shuttling riders across the Tower Bridge, but in form and function the system would still bear some troubling resemblances to Tampa and Little Rock.

3 Portland averaged 10,814 boardings per weekday in 2012. Tucson is reportedly capturing 5,000 boardings per weekday. 16

Little Rock Streetcar

The River Rail streetcar spans the Arkansas River to connect Little Rock with North Little Rock. Key destinations include a baseball park, a basketball arena, a convention center, waterfront attractions, and a major museum. Route design is geared less toward getting people into downtown and more toward circulating them once they're there. As two aspirational mid-sized American state capitols, the similarities between the Little Rock and (proposed) Sacramento streetcar are tough to miss. Little Rock officials, however, decided that small, historic vehicles and a more limited schedule would be sufficient to meet the needs for downtown visitors. Average daily ridership is less than 250 passengers

Union Pacific Track: Roadblock to Expansion East of 19th Street

Union Pacific railroad tracks prevent the Sacramento streetcar from running east of 19th Street. As Regional Transit concluded when building Light Rail in 1987, the only way to reliably run passenger rail across an active freight corridor is by bridging over it, as they did with the Bee Bridge.

Tampa civic leaders learned this the hard way, ten months prior to opening, when streetcar project managers revealed that CSX would require a $400,000 insurance premium for an at-grade streetcar crossing of their freight line. In the case of Sacramento, there is no indication that UP would allow a crossing even with an insurance policy in place.

17 Official documents for the streetcar, which acknowledge the problem, curiously suggest that if a solution proves unattainable, the streetcar system could still be expanded eastward, riders would just have to "walk across the [UPRR] track and transfer" to a different streetcar vehicle on the other side. 4

Lack of streetcar service east of 19th Street would force Sacramento State students to catch the RT #30 bus or Light Rail instead. The result? For $4.0 million a year in operating costs, the streetcar will be largely a redundancy.

The "Bee" Bridge As Regional Transit concluded when building light rail in 1987, the only way to reliably run passenger rail across Union Pacific's active freight corridor on 19th Street (at right) is by bridging over it, as they did with the Bee Bridge, which runs from 18th Street to 23rd Street in the R Street corridor, adjacent to the headquarters of the Sacramento Bee. Sacramento streetcar plans have yet to identify an alternative solution for extending the proposed J Street streetcar east from 19th Street.

4 Sacramento Streetcar System Plan, pg. ES-3 (2012). 18 West Sacramento Bus Riders Will Be Forced to Transfer

On the West Sacramento side, the sole source of ridership would seem to be at the Civic Center, where local buses currently meet for passenger transfers and where Sacramento City College operates a branch of 2,500 students. Currently, Yolo Bus operates four buses per hour in each direction over the Tower Bridge. In order to avoid redundancy and help the streetcar meet its ridership projections, three of those buses would likely be cut back to the Civic Center terminal, with riders being forced to transfer to the streetcar. 5 Official documents fail to indicate how many of the officially projected 5,800 streetcar riders are simply existing bus riders who will be forced to transfer.

Tower Bridge Source: wikipedia.org.

5 Routes #40, #41, and #240 would presumably be cut back to the Civic Center. Route #42, which serves the airport, would still need to cross Tower Bridge. 19 West Sacramento Service Will Be Cut in Half

Compounding the problems for West Sacramento transit riders, streetcar planners have quietly advanced an addition to the plan, one that would cut service back to the Civic Center to every 30 minutes.

As shown in the newest route map and in the publicly available engineering drawings, the Riverfront branch would extend south from Raley Field, along Riverfront Street, to a terminal under Pioneer Bridge, where a streetcar maintenance and storage barn might potentially be located. A consultant's analysis fails to mention that if the West Sacramento streetcar line is split into two branches, each branch will only have a streetcar once every 30 minutes.6

6 With the main line running every 15 minutes, each of the West Sacramento branches would be served only once every 30 minutes. Of course, 15 minute service could be maintained on the branches by running the main line at every 7.5 minutes; however, this would require doubling the fleet size from 6 to 12 vehicles at approximately $3 million per vehicle, and doubling the operating cost from $4.0 million to $8.0 million annually. The street network in Downtown Sacramento may also be unable to support an additional four trains per hour in each direction. The true impact of branching the line at Raley Field is actually to render the Civic Center terminal obsolete. As long as the streetcar branches at Raley Field, Raley Field will be the only natural transit hub, quite to the dismay of planners who oversaw the centralization of amenities at the current Civic Center terminal, as well as to engineers who did not design the major Tower Bridge Gateway improvements to accommodate a transit hub. 20 The new Riverfront branch would bisect the Bridge District, a new development area unlikely to generate more than a little commute-hour ridership. Meanwhile, existing West Sacramento bus riders will not only be forced to transfer at Civic Center, but the number of trips across the river will be reduced from four buses to just two streetcars per hour.

For large Bridge District land developers, a streetcar line means help from the city on zoning, variances, permitting, and inspection. It also means more affluent homebuyers seeking a stylish urban look and feel. It's little surprise then that, despite its shortcomings as a transit route, the Riverfront branch has had its steadfast supporters, nor that it has managed to win the support of the streetcar project's Policy Steering Committee.

VI. TRAFFIC AND OPERATIONAL ISSUES

As a street railway operating in a dense urban environment, a streetcar is by definition a challenging project to design and operate. Inherent difficulties include:

 Inflexibility and inability to detour around obstructions  Compatibility problems with cars, buses, bicycles, and pedestrians  Vulnerability to system-wide outages, e.g., loss of power

One of the reasons streetcars would appear to be losing favor nationally is that they suffer from most of these drawbacks without achieving any of the economies of scale of a light rail system, i.e., the ability to run multi-car trains and carry several hundred passengers at one time.

Worse Traffic on I, J, and L Streets

The streetcar route described in the 2008 Draft Environmental Impact Report envisioned streetcars on Capitol Mall; streetcar service to Amtrak was not part of the route. The new route, which now runs along 3rd Street to the Amtrak depot, adds multiple crossings of I Street, J Street, and L Street, each of which are congested freeway entrances or exits. On I Street and J Street, streetcars will cross at both 3rd Street to get to Amtrak and at 7th Street after leaving.

At I Street, streetcars will actually have to cross freeway ramps, both for southbound and northbound Interstate 5, as well as a ramp to the I Street Bridge. How will these crossings be designed? Will they impact traffic? The existing documents on the streetcar are completely silent on this issue.

Since cars enter the southbound I-5 ramp at high speeds, a streetcar crossing here will almost certainly require a railroad crossing gate. As for the northbound I-5 ramp, it is not clear that a crossing can be accomplished at all, due to the ramp being above grade. As the photo on the next page shows, the northbound I-5 ramp is too high for a streetcar to cross over it, yet not high enough that a streetcar could pass under it. The only solution would appear to be to relocate the ramp entirely.

Visiting planners from the Urban Land Institute have publicly suggested that the northbound I-5 ramp should indeed be relocated. Is this part of the streetcar plan? If so, what is the cost? If not, what happens to the streetcar's construction schedule if a separate relocation project runs into funding or engineering difficulties?

21 Unfortunately, the streetcar planners have not provided one shred of impartial analysis of these issues. The only publicly available examination of traffic and engineering issues is the 2008-9 Environmental Impact Report, a report that is based on a completely outdated streetcar route which does not traverse 3rd Street at all and which does not cross I Street, J Street, nor L Street.

Meet the Traffic Problems of 2018

Courtesy of the Proposed Downtown Riverfront Streetcar

Engineering drawings released by the City of Sacramento show the streetcar crossing the Interstate 5 southbound ramp, the I Street Bridge ramp, and the Interstate 5 northbound ramp. Source: City of Sacramento.

3rd Street at I Street, near Old Sacramento, facing north. The route of the proposed streetcar crosses both the southbound I-5 ramp, pictured in the foreground, as well as the northbound I-5 ramp, in the background. Crossing gates would likely be required at the southbound ramp, backing up traffic on I Street. The means and cost of crossing the northbound ramp are completely unknown, and given the vertical clearance requirements for the streetcar's overhead electrical system, would appear impossible without relocating the ramp altogether, a task curiously not mentioned in the streetcar's promotional documents. Image downloaded from: maps.google.com.

22

Streetcars travelling up and down 3rd Street will cross freeway entrances or exits three times--at I Street, J Street, and L Street. Even though the streetcar will cross with other automobile traffic, the conversion of 3rd Street from one-way to two-way to accommodate the streetcar will add new phases to traffic signals, stacking up traffic considerably on each street. Image downloaded from nearmap.com.

City engineering drawings show that for the streetcar to turn from eastbound J Street onto southbound 19th Street, it would have to swing from the far left-hand lane, all the way across the other lanes of eastbound traffic on J Street, which would require a special signal phase exclusively for the streetcar. Due to the turning radius of the streetcar, these special signal phases will be necessary J Street/19th Street, L Street/19th Street, and L Street/12th Street.

23 Traffic Problems, cont.

As if the crossings at 3rd Street were not worrisome enough, the City's engineering drawings also show turns at three major intersections that will require the streetcar to have its own special phase in the traffic signal, so it can sweep across multiple lanes of parallel traffic (at J and 19th Street, L and 19th Street, and L and 12th Street).

FTA reports indicate that updated environmental work on the new streetcar route was expected in December 2014. Yet with an upcoming vote on an assessment district, the only objective engineering report made available to the public is the outdated 2009 environmental document, which includes none of the key intersections. Could it be that streetcar planners are sitting on a 90 percent complete document until after the public vote?

Exemptions in the City's new general plan allow project applicants to officially state that there are no "impacts" even when a project actually increases vehicular congestion.7 Technicalities such as this will be of little comfort to Sacramento motorists and visitors if and when the streetcar causes real-world traffic problems. Without any updated environmental work, interested members of the public are left speculating if the traffic will be as bad as it appears.

Notable crossings of major Sacramento streets for the proposed streetcar. Each point would have four streetcars cross in each direction every hour. L Street would have three new crossings, with 24 crossings vehicles per hour, each of which may require its own signal phase. J Street will similarly have 24 new streetcar vehicle crossings per hour. I Street would have the aforementioned crossings of northbound and southbound freeway entrances. Image downloaded from nearmap.com.

7 See the "Core Area Level of Service Exemption" described in the Downtown Entertainment and Sports Center Draft EIR, pg. 4.10-34 (2013).

24 Vulnerability of Light Rail to Streetcar Delays

Light rail in Sacramento, by its nature, must run a tight schedule. A single-track bottleneck on the American River Bridge means that one late train can delay the entire system. Because only a fraction of the route runs on downtown streets, and because Light Rail has signal priority, RT has managed to maintain over 97 percent on-time performance.

Streetcars, on the other hand, operate entirely on downtown streets, usually without signal priority, and tend to have on-time performance closer to buses. The Portland streetcar was recently reported to be running at 82 percent on-time. Reliability in San Francisco is notoriously much worse. This poses a considerable problem when streetcars begin sharing track with light rail, as the current streetcar plans envision.

In grappling with this problem, Sacramento may be somewhat unique. New streetcar cities like Cincinnati, Kansas City, Milwaukee, and Tucson do not have existing rail systems; their streetcars will be stand-alone systems. In Washington and Atlanta, the existing rail systems are like BART; they are entirely underground or grade-separated and will not interface with new streetcars.

For Sacramento, the model may oddly be Portland, where the streetcar system was built across existing light rail tracks (no track is actually shared). Official reports show that Portland light rail now runs at 84 percent on-time, much like the streetcar.

Delayed streetcars in a stand-alone system would not necessarily be terribly impactful, but when streetcars share track with Light Rail, delayed streetcars will result in delayed Light Rail trains, which, at 360-feet, can not only block entire intersections, but which have the capability of tripping traffic signals, throwing off carefully balanced Downtown signal timing.

Engineering drawings released by the City of Sacramento show the streetcar crossing the Interstate 5 southbound ramp, the I Street Bridge ramp, and the Interstate 5 northbound ramp. Source: City of Sacramento.

25 Tower Bridge Crossing

The previously noted congestion issues are compounded by other design vulnerabilities, most notably on the Tower Bridge crossing. A 2008 comment letter from Caltrans highlights several of the issues, including:

 A requirement that the streetcar line on Tower Bridge be single-tracked  A requirement that multiple lanes of auto traffic be stopped when streetcars cross the bridge  Inevitable schedule disruptions when the bridge is raised  Potential electrical system maintenance and reliability issues on the bridge

In response to the electrical maintenance and reliability concerns, the consultants' response was to point to the Steel Bridge in Portland, where light rail operates on a 100-year old vertical lift bridge. Media accounts paint a grim picture of Portland's seemingly perpetual struggle with this bridge:

"Like someone trying to find that bad bulb on a house wrapped in Christmas lights, technicians spent a maddening day looking at and testing all overhead and wayside equipment in the area of Steel Bridge and the Rose Quarter...

...Before sunrise, when one substation lost power, adjacent substations picked up the load, eventually putting too much stress on the other substations. Six went down, stopping a MAX train in the middle of a downtown intersection and another on the Steel Bridge...

...TriMet knows it has a problem with the 101-year-old bridge... The transit agency didn't have data available on how many times overhead propulsion wires have gone dead in the past year. But in recent years, train speeds have been reduced from 15 mph to 5 mph due to wear where the lift span meets the fixed structure and due to sensitive signaling equipment on the lift span...

...'All elements of the Steel Bridge are being reviewed for possible improvements and repairs to be able to return to regular speed,' said Mary Fetsch, a TriMet spokeswoman. TriMet, she said, is looking for 'federal and local funds' to help with the improvements."

This may very well explain CalTran's newfound interest in giving away the Tower Bridge to the Cities of Sacramento and West Sacramento.

26 The $150 Million Turning Lane

The 2008 environmental work shows that the streetcar's supposed ability to improve traffic may rest on one small detail, a detail that is not even technically part of the streetcar system.

As the traffic study explains, new development in West Sacramento is projected to push traffic on Tower Bridge to gridlocked conditions, with or without the streetcar.8 According to the engineer's simulation, however, a single strategically located right-turn lane would help clear the blockage. Without explicitly mentioning what the streetcar itself would do to Tower Bridge traffic, the engineers cleverly included this right-turn lane in the streetcar project definition, as though it were a functional part of the streetcar.

With the right turn lane included, the engineers found that the "streetcar" would reduce traffic on Tower Bridge. The study quietly admits that for the $150 million project, "the largest [transportation] benefit would be related to the intersection improvements at [eastbound] Capitol Mall/3rd Street, where the additional right turn lane substantially reduces queuing."9

Given that the draft environmental work showed opposing traffic being stopped any time a streetcar crosses Tower Bridge, one can only wonder how traffic would have fared without the turn lane.

Tower Bridge Bottleneck

Raley Field, Tower Bridge Gateway, Tower Bridge, Interstate 5, and Capitol Mall. Streetcars would traverse this segment four times per hour in each direction. Traffic is expected to become heavily congested in long-run simulations. The streetcar's contribution to alleviating traffic? Traffic will have to be stopped every time a streetcar needs to cross the bridge. Alternative configurations consider removing auto lanes from Tower Bridge entirely. Image courtesy nearmap.com.

8 Streetcar DEIR, pg. 4-18 (2008). 9 Streetcar DEIR, pg. 4-22 (2008). Note also that the streetcar would not even travel through the new right turn lane; the streetcar makes a left turn at this intersection. 27 Problems with Arena Service

With Raley Field and the future Downtown Arena both situated along the route, special event service would seem to figure prominently in the plans for the Sacramento streetcar. Yet streetcars, as a mode of transportation, are a notably poor choice for the brief surges in demand characteristic of special event service. Concrete problems include:

 Compared to standard Light Rail vehicles, streetcars are smaller and lack the ability to be coupled into multi-car trains  The streetcar system will have a small fleet and small staff with limited ability to scale up for large events  Even compared to buses, the streetcar has less ability to deploy a large fleet and less flexibility to adjust to changing staging areas, pickup locations, etc.  The streetcar tracks will eliminate existing Light Rail vehicle storage near the Amtrak depot that would be important for post-special event service

Not only is the streetcar ill-suited for special event service, but official travel demand forecasts for the Arena did not indicate any quantifiable demand for it.10 All transit patrons are instead assumed to ride the existing RT Light Rail system, which provides longer-distance service to Folsom, Roseville, Elk Grove, etc.

In addition to being poorly suited and likely under-utilized, it seems plausible that the streetcar will actually worsen traffic during major events.

Given the heavy traffic projected before and after games, it is likely that traffic congestion would be eased by suspending streetcar service during the pre- and post-game rush. This would presumably help RT as well, as the Light Rail lines and stations are projected to be at capacity.

Safety and Security of Streetcars: Will It Be Any Better Than Light Rail?

A January 9, 2015 Sacramento Bee article reports on the demand by six prominent Sacramento business leaders that Regional Transit take immediate action to improve the safety, security and cleanliness of Light Rail trains and stations ("Business Leaders to R.T.: Clean Up Your Act"):

“While RT does many things well, there are a number of issues of significant concern that discourage ridership, such as public safety, station cleanliness and poor customer service,” the group said in a six-page memo to RT this week."

Light Rails trains, under the management of Regional Transit, have been the scene of fatal shootings and many would-be passengers are afraid to ride them, particularly in the evenings. Yet streetcar project planners have indicated that Regional Transit will likely be engaged to operate the Sacramento streetcar system, under the oversight of a nonprofit organization. If Regional Transit has been unable to keep Light Rail trains and stations clean, safe and free of crime, why would planners

10 The streetcar and all other future/planned projects are not assumed to be operational in the 2020 modeling results, but for the long-term or "cumulative" 2035 forecasts, the model assumes not only the streetcar, but a network of three streetcars. The forecasts nevertheless show 100 percent of transit riders using existing RT Light Rail lines, with a footnote indicating that ridership on modes other than light rail was assumed to be negligible based on experiences in comparable cities with comparable transit systems. Note also that the same transportation engineers (Fehr & Peers) prepared the transportation studies for both the arena and the streetcar. 28 expect Regional Transit to have better success in operating streetcars? Such concerns are heightened by the fact that the streetcars will operate along streets with some of the greatest concentrations in our region of problem populations, including the homeless, the drug-addicted and the mentally ill. And the City of Sacramento has yet to demonstrate the political will to solve these problems along K Street and nearby streets.

How can we expect a new transit system that's: (a) not regularly staffed with monitors to assure payment of fares and general order; (b) will operate in an area struggling with problem populations; and (c) will be managed by the same agency that's under current attack for poor security of its existing transit system, to operate streetcars free of serious safety, security and cleanliness issues?

Streetcars and Bicycles Are Not Mixing

From our review of the experiences of other cities, it's apparent that bicycles and streetcars are not coexisting well. The headlines tell the story:

"More Than 80 Bikes Crashes Documented on Tucson's New Streetcar Tracks," May 25, 2014, Arizona Daily Star.

"Will Portland Streetcars Ever Find a Way to Prevent Bike-Rail Crashes," August 14, 2013, BikePortland.org.

It is apparently a chronic problem for which no one has come up with a satisfactory solution. Bicyclists end up with there tires caught in the tracks of streetcars unless they cross them at a 90-degree angle. As a city with a robust and growing bicycling community, this is a major concern.

VII. ECONOMIC DEVELOPMENT IMPACTS

Impacts Will Vary by District

With the streetcar's transportation benefits being tenuous, the question remains as to its utility as a catalyst for economic development. For property owners along the line considering the value of the project, there would appear to be several key differences from one segment of the line to the other:

 In West Sacramento, nearby properties are characterized by larger parcels, more new or unbuilt sites, fewer landowners, and numerous aging or blighted parcels. As business tends to be less established, the risk of business interruption from construction activities is lower. Tangible benefits for land investors include higher density zoning and lower parking requirements. For developers pursuing large, high-risk projects, the streetcar means city help with approvals, permitting, inspection, taxes, fees, etc. The streetcar's value is as a plan on paper being shown to an official or as a brand-new system being showcased for a homebuyer. The eventual replacement of an aging system is not a concern for most current property owners.

 In Downtown Sacramento, there are fewer unbuilt parcels, but the development environment is still similarly situated for large, deep-pocketed owners able to pursue complex, high-risk projects. With the Arena under construction, the city is now clearly committed to wholesale change, high-leverage projects, and close city involvement. Given the greater tendency toward office uses, downtown owners also have less risk of business interruption from construction. 29  Midtown Sacramento presents a different situation. Mostly built-out, and having already had its renaissance, Midtown has greater need for stability and services, than for change and redevelopment. While there is always need for city help on permitting, there are few large lot projects, and fewer high-debt transactions. The property owners tend to be smaller, business tends to be healthy, and customer bases well-established. In Midtown, construction on city streets poses a real risk of business interruption. The value proposition for Midtown property owners is more speculative. Will the streetcar bring more customers? Will it bring better customers? Is it what's needed to keep midtown popular? Will it be worth the short-term construction impacts?

Economic Projections of Higher Property Values: Are They Credible?

Modern streetcar projects today are justified not on the basis of transit benefits or cost- effectiveness, but on the untested argument that streetcars serve as a catalyst for development and economic growth. Streetcar promoters tend to focus on Portland's experience with streetcars, where promoters claim that downtown development was "caused" by the development of the Portland streetcar. An economics firm, which has provided projections of economic benefits from streetcar systems to Sacramento and several other U.S. cities, claims that the Sacramento streetcar will increase property values by billions of dollars and bring a flood of news tax revenues to both Sacramento and West Sacramento. We find such predictions unsupportable by the evidence. Portland's economic development occurred concurrently with loads of investment incentives and tax subsides for local developers offered by local government, as well as the Portland streetcar. It is impossible to prove whether the economic incentives or the streetcar "caused" the development. The better answer is that they all played a role. The problem is that Sacramento is not Portland. Sacramento simply does not have in its toolbox the economic development tools and tax incentives that Portland possessed and deployed before its streetcar line was built. As a consequence, using the Portland experience as an economic model for Sacramento would be a mistake. The same can be said for development that has occurred in proximity to Tucson's new streetcar line. The collection of incentives, fee waivers and other subsidies offered by Tucson to local developers would make our local developers salivate. But we are not Tucson either. Portland State University economics professor Eric Fruits says: "Many ascribe the development of Portland’s heralded Pearl District to the streetcar. In truth the streetcar was more of an afterthought. The Pearl’s success began with a few pioneering developments that took advantage of historic building tax abatements to convert warehouses into condos. The success of these pioneering developments attracted other investments and more developments. After these successes, an urban renewal area was created and the streetcar came along a few years after the birth of the urban renewal area. Development made the streetcar possible, not the other way around. It’s impossible to find a clear-cut example of where streetcars are the single factor driving development. It’s impossible because streetcars are always just one part of a complex development package. The packages can include roadway improvements, tax abatements, rezoning and environmental cleanup. There is no way to determine whether a streetcar system is just one of many factors that boost development potential or is a vital linchpin without which development would be impossible." 30 The problem we have with giving much credence to those who predict that major economic growth will come from the construction of a streetcar line is that too often the makers of such predictions have vested, financial interests in streetcar projects. Impartial assessments, like that of Professor Fruits, are much more trustworthy in our view. Construction Impacts on Merchants and Businesses: Mitigation?

The Kansas City Star documents what construction delays have done to business owners along its new streetcar line, as a supposedly simple streetcar project turned into a replacement project for the city's aging water mains.

For a relevant local example, Sacramento residents need only look back to 2007, when Native American artifacts and unmapped underground utilities doubled the construction schedule for Regional Transit's one-mile Richards Blvd. Light Rail extension to 30 months.

Given the unknowns related to the crossing of the Interstate-5 ramps, engineering challenges with the Tower Bridge electrification, and a crossing of the Union Pacific in West Sacramento that will require a safety exemption from the California PUC,11 the streetcar project seems poised for similarly unexpected construction cost surprises.

In Seattle, despite a $15 million program to temporarily subsidize affected businesses, 15 percent of stores closed during the five-year light rail construction period. To date, no such program has been announced for Sacramento, where property owners are instead being asked to fund the project.

VIII. PROPERTY TAX ASSESSMENT & FISCAL IMPACTS

Imposition of Tax Assessment is a Two-Election Process

The City is proposing to use Mello-Roos financing to help fund construction of the streetcar system. Such a financing requires the formation of a Community Facilities District (CFD), the authorization of a long-term special tax levy on property located within the CFD and the issuance of bonds to fund construction, the repayment of which, including interest, will come from the proceeds of the special tax levy.

Normally, Mello-Roos financings and associated special levies are created with just a single election, typically requiring a two-thirds majority vote of registered voters living in the proposed CFD. In this instance, a very high percentage of the registered voters in the proposed CFD are renters who would not be paying (at least directly) the streetcar tax assessment. For political and equity reasons, the City of Sacramento, to its great credit, is first holding an advisory vote of owners of real property located in the proposed district (i.e. the folks who would actually have to pay the levy). The City has announced that it will not proceed with the tax assessment unless a majority in interest of the property owners approve of it in a mail ballot-only advisory vote, set to begin on January 14th with the mailing of ballots to owners and conclude at 5:00 p.m. February 17, 2015, the deadline

11 Streetcar Draft EIR, pg. ES-25 (2008).

31 for returning ballots to the city clerk's office. If the property owners approve of the tax in the advisory vote, then the City is expected to call a formal election of registered voters in the CFD in May 2015. In that election, a simple majority of votes would be sufficient to legally authorize the tax levy.

Apparent Major Change in Method of Calculating Assessments

For commercial and office properties, the amount of the assessment will be computed based on each parcel's land and existing building square footage (residential properties would be assessed based on a per unit charge). This appears to be a major and quite recent change from the original formula that was being considered for determining assessments. According to a May 2014 web post by Senior Policy Manager Chris Worden with the Downtown Sacramento Partnership,

"...owners whose properties are zoned for higher density uses would pay a higher assessment rate as well with the city’s general plan defining those areas. For example, property owners in the CBD [Central Business District] would be assessed at the highest rate based on the CBD’s higher threshold for residential density."

In other words, owners under such a system would have paid assessments based on the density potential of their property, as defined by the City's zoning and general plan, not based on a property's current density. Such an approach seems quite fair in that the core rationale for streetcars is to serve as a catalyst for development of higher densities. Those with properties that could be built out with higher densities would certainly profit more from future development than owners with properties with more limited potential for higher density. Such an approach would also have required owners of commercial property located in the central core of Downtown, where higher densities are allowed, to pay higher tax assessments than owners of comparably sized commercial buildings in Midtown.

Why was this approach abandoned? We don't know, although owners of commercial properties in the central core of Downtown will be paying smaller assessments as a result of the change, while commercial property owners in other parts of the CFD will be paying more. Perhaps owners of property in the CBD had more political juice than owners of Midtown properties.

Proposed Property Owner Ballot: A Blank Check?

The advisory ballot, to be sent shortly to property owners, will ask those owners whether they would like to: (1) form a streetcar Community Facilities District (CFD); (2) call an election asking registered voters in the CFD if they wish to approve a special tax levy and issue bonds to be repaid from the tax levy; and (3) proceed with construction of the proposed streetcar system.

For an advisory ballot, this is fraught with financial quicksand. The quicksand is created by the ballot language listing “permissible uses” for spending the tax assessments. It includes a an exhaustive list of 52 allowed spending categories. Examples include: (1)“Automobile, bus, van accessways including roads, parking lots;”(2) “Environmental mitigation, e.g., wetlands, historic/archeologic, parks;” (3) Legal; Permits; Review Fees by other agencies, cities, etc.” The list also includes an additional list of 17 cost items that are called: “Formation, Administrative, and Incidental Expenses.” Examples: “City, Participating District staff review, oversight and administrative services.”

This is a potential blank check for virtually any and all costs that the six participating government agencies in the streetcar project choose to toss into the CFD budget, subject to no property owner review or other independent oversight. While this broad cost shifting authority is included in the 32 advisory ballot for property owners, it is expected that the same spending authority will appear in the formal ballots used in any future election of registered voters in the proposed CFD.

The Truth About the 40-Year Duration of the Property Tax Assessment

A December 12, 2014 Sacramento Bee news article ("Streetcar Plan Set for a Vote"), written by the Bee's respected transportation reporter Tony Bizjak, reported that: "Landowners will be asked to commit to annual payments for 30 years..." Two days later, on December 14, 2014, the Sacramento Bee published an editorial ("Sacramento Streetcar Project Deserves to Stay on Track") that reported that the tax assessment would be a "30-year tax" on Downtown and Midtown property owners. The Bee story that the tax would last for only 30 years gained broader reach when it was picked up by wire services and news aggregators. Even trade publications, such as Railway Age, published an article stating that: "Landowners will be asked to commit to annual payments for 30 years to help Sacramento and West Sacramento [build] the proposed line." ("Sacramento Businesses Mull Tax for Streetcar," December 12, 2014).

But the City of Sacramento's manager for the streetcar project, Fedolia "Sparky" Harris, when specifically asked, stated that the Community Services District that would be created to levy and collect the tax assessments "is set to expire in [FY] 2054-2055" - 40 years from now (see January 3, 2015 e- mail from Harris to EOS, copy on file at EOS's offices).

A few days later, a pro-streetcar tax advocacy group, "GO! Streetcar," mailed a campaign mailer to Downtown and Midtown property owners that included the following coy and, given the context, rather misleading statement: "all owners within the district will pay an annual assessment for the life of the district to help finance the new system" (italics added) (January 6, 2014 Letter from Dain Domich, President, Board of Directors, Friends of Light Rail & Transit, copy on file at EOS offices).

But GO! Streetcar's campaign mailer notably fails to mention what "the life of the district" would be. The GO! Streetcar group, by omitting any mention of the duration of the district, is taking full advantage of the false public understanding, created by false statements published by the Bee and other media, that the tax would last for only 30 years.

Now folks may disagree with the editorial views of the Sacramento Bee and even question the slant of some of its news stories from time to time, but no one seriously believes that Bee editors or reporters manufacture phony facts out of thin air. It appears that City officials may have been the source of the Bee's false statement. But even if they weren't the source, City officials have taken no apparent steps to correct the Bee's false statement after it first appeared in its December 12th new story or after the false statement was repeated in the Bee's December 14th editorial.

This is not the first time City officials have manipulated the election process in connection with City ballot measures. In June 2013, the Sacramento County Civil Grand Jury issued a critical report on the City's mishandling of ballot materials for three city ballot measures in the November 2012 election. On September 5, 2012, EOS published a list of 10 serious irregularities it had identified with the City's handling of ballot materials for Measure U, the City sales tax hike measure that appeared on the November 2012 municipal election ballot.

We also observe that the draft ballot that City staff has prepared for the upcoming advisory vote makes no mention of the duration of the tax levy. Before proceeding with an advisory vote of property owners, City officials should: (a) modify its ballot materials to make it crystal clear to owners that the 33 proposed levy would continue for 40 years, not 30 years; and (b) send a special notice to owners, under separate cover, identifying and correcting the false information disseminated by local media on the duration of the tax.

Why Tax Assessment is Much, Much Greater than $30 Million

The Sacramento city council is poised to approve bonding authority for the proposed streetcar community facilities district (CFD) that would empower it to borrow up to $38 million to help fund construction of the streetcar system. Consequently, if the CDF is formed, property owners will be subject to tax assessments to repay up to $38 million of borrowing, plus bond interest, rather than just the $30 million "contribution" figure that is being misleading bandied about by project proponents and some media outlets.

Since the city has not released a multi-year payment schedule of aggregate annual tax assessments, we really have little idea what the total tax assessments will be over the next 40 years. Since the CFD will be issuing bonds to be paid off with the tax assessments, the $30 million figure is not the total assessment figure at all, but merely the minimum amount that will be borrowed via bond sales (maximum borrowing: $38 million). Property owners will be on the hook to repay not just the $30 million to $38 million of bond principal, but all bond interest as well.

If the duration of the bonds issued match the authorized duration of the CFD (40 years), interests costs could (depending on the bond interest rate and payment terms) amount to as much as 150% of a $30 million minimum bond principal amount or $45 million of interest, resulting in total tax assessments of $75 million on property owners. If the amount borrowed is the maximum allowable - $38 million - interest costs could be as high as $57 million and total tax assessments could amount to $115 million.

The Role of GO! Streetcar and Its Sponsor, Friends of Light Rail & Transit

The sponsor of the GO! Streetcar campaign, Friends of Light Rail & Transit ("Friends"), has very close connections with a number of local government officials. The Friends has also received sponsorship funding from the City of Sacramento and other local governments. According to the Friends' web site, Fedolia "Sparky" Harris, the City's streetcar project manager, currently serves on the Friend's board of directors, as do senior officials with SACOG, Regional Transit and other local government units.

In a telephone conversation with EOS President Craig Powell in late December 2014, Harris stated that "we're having the Friends of Light Rail handle the advocacy piece" for the upcoming advisory vote of property owners.

Given the major role that the City and other local government officials play in the management of the Friends, the past funding that the City and other local governments have provided the Friends and the proprietary like admission by Harris that "we're [i.e. the City] having the Friends handle the advocacy piece" for the upcoming streetcar tax vote, the question arises: is the City of Sacramento undermining the legitimacy of the upcoming advisory vote by using taxpayer-funded resources and government power to influence and manipulate the results of the advisory vote of property owners and, potentially, the May 2015 vote of registered voters in the CFD?

34 The election procedures being used by the City for the advisory vote are not providing opponents of the streetcar tax any opportunity to include opposing arguments in the ballot materials being mailed out by the City. If the City had an interest in holding a fair and impartial advisory vote on the streetcar tax, it would provide opponents of the tax a fair opportunity to convey their views to voting property owners - as well as an adequate campaign period in which to fairly and fully debate the proposal.

Arena Developers' Sweetheart Deal on the Streetcar Tax

The City is proposing that the tax assessment on property owners be based on the proximity of each parcel to the proposed streetcar line and the current use of the parcel (i.e. residential vs. commercial), with different rates for land area vs. building area. The basic categories and rates can be summarized as follows: Distance to the Proposed Streetcar Line Type of Property Basis One Block Two Blocks Three Blocks

Commercial/Office Parcels Land Area per land sq. ft. $0.050 $0.040 $0.030 Building Area per building sq. ft. 0.140 0.112 0.084

Entertainment & Sports Center Land Area not taxed not taxed not taxed not taxed Building Area per building sq. ft. 0.050 0.040 0.030

Residential Parcels Market Rate Units per unit 60.00 48.00 36.00 Affordable Units per unit not taxed not taxed not taxed Residential Hotel Units per unit not taxed not taxed not taxed

What is so surprising about these rates is that the Downtown Arena - which is already receiving over a quarter of a billion dollars of City taxpayer subsidies in the Arena deal - is slated by City officials to given a 100 percent exemption from the streetcar tax with respect to its land area and a 66 percent discount from the tax on its building area in comparison to the building rates that would be paid by all other commercial and office building owners in the proposed financing district.

The subsidies provided in the Arena deal were provided to incentivize the Arena's developers to build the Arena. They are now building the Arena. They need no further incentives to build what they are already building. The notion that all other Downtown and Midtown property owners in the CFD, who enjoy no Arena subsidies and who have struggled through the dark years of the Great Recession, should now be asked by the City to further subsidize the billionaire developers of the Arena by paying higher tax assessment rates on their own commercial and office properties is outrageous and unconscionable.

How big is the streetcar tax subsidy that Arena owners will enjoy? In a December 12, 2014 Sacramento Bee article ("Streetcar Plan Set For a Vote"), Mark Friedman, one of the managing partners of the arena investment partnership, was quoted as saying that the streetcar tax assessment on the Arena "will be more than $100,000 per year." Given the 100 percent streetcar tax exemption the Arena would enjoy on its land under the proposed plan and the 66 percent tax discount it would have on its building area, it is quite likely that the Arena developers would pay at least $350,000 per year in streetcar taxes 35 if they were not the beneficiaries of this astonishing sweetheart deal.

If the subsidy is left unaltered and the streetcar tax is approved, Arena developers would receive an annual subsidy of at least $250,000, for a total subsidy over the 40-year life of the streetcar tax of over $10,000,000 - every penny of which will be made up for with higher assessments paid by other property owners in the proposed financing district.

Sacramento property owners should insist that the City revise the proposed tax levy rates to assure that Arena owners pay the same rates as all other Downtown and Midtown commercial property owners.

Sacramento Owners vs. West Sacramento Owners: A Question of Fairness

One aspect of the financing plan for the streetcar system that has received little attention are the different ways in which West Sacramento and Sacramento are paying for their respective contributions (West Sacramento: $25 million; Sacramento: $40 million) to the construction cost of the project. By using proceeds from a local sales tax, West Sacramento is spreading the burden of financing the streetcar project broadly among all West Sacramento residents and businesses. In Sacramento, only $10 million of the cost is being borne by the public generally ($7 million from the City's general fund and $3 million from Sacramento County's general fund). Three-fourths of the Sacramento share or $30 million is being borne solely by property owners in the Downtown and Midtown area.

Is it is altogether fair that Sacramento property owners are bearing the lion's share of the local cost while West Sacramento property owners are not?

Who will receive the greatest share of the economic benefits of the streetcar line? Will it be Downtown and Midtown property owners whose properties are already largely built out? Or will it be West Sacramento property owners, several of whom are poised to rapidly develop large parcels of undeveloped land? It's rather clear that West Sacramento property owners are poised to profit most from the addition of new transit, particularly as the area is not currently served by any form of rail transit, while Sacramento is served by Light Rail transit.

So the question becomes: is it fair for the property owners who will benefit most from the proposed streetcar system - West Sacramento property owners - to pay nothing directly towards the construction of the system, while Sacramento property owners, who will receive fewer economic benefits, bear the lion's share of the City's costs for the project?

Special Benefit to West Sacramento's Triangle District Developers?

Up until quite recently, the streetcar plan included two possible options for the location of the streetcar's storage and maintenance facility. One option was to build it under the W/X Freeway and to use existing Light Rail lines to move streetcars from their Downtown/Midtown loop to the storage/maintenance facility under that freeway. The second option was to build the streetcar facility in West Sacramento, south of the Tower Bridge on Riverfront Street, under the Pioneer Bridge. The second option, however, would require the building of a spur (a dead-end line) extending south from the Tower Bridge along Riverfront to the streetcar facility, a distance of over one-half mile. According to a city staff report prepared for the November 20, 2013 meeting of the West Sacramento city council: "The estimated cost of installation of this line plus stations [for passenger loading and unloading] is $10.4 million." 36 Sometime last year, the route map for the streetcar project was changed to designate West Sacramento as the location for the streetcar facility (the second option) and to specify a new spur down Riverfront Street. Around this same time, the estimated cost of the system rose from an estimate range of between $125 to $135 million to a fixed cost estimate of $150 million, an increase of $15 to $25 million. A significant portion of the increase in the projected project cost (i.e. $10.4 million) was almost certainly attributable to the decision to select West Sacramento as the location for the streetcar facility.

Why is the project being burdened with $10.4 million in extra costs when the streetcar facility could be built under the W/X Freeway in Sacramento without such additional expense? Put another way, who benefits most from the construction of a $10.4 million spur along Riverfront Street? The answer: Triangle District developers in West Sacramento who have sizeable parcels near Riverfront Street. The new spur could very well enhance the value of such parcels. But who is paying the $10.4 million cost of the spur?

Under the Memorandum of Understanding ("MOU") agreed to by the governments who are jointly developing the streetcar project, the costs of laying track and building stations are being divided between Sacramento and West Sacramento based on the ratio of track built in each jurisdiction. According to the latest plan, Sacramento is set to bear 74 percent of line/station construction costs while West Sacramento is set to bear the other 26 percent. Theoretically, the $10.2 million cost under such a formula should be borne 100 percent by West Sacramento as it would increase the mileage of track on the West Sacramento side of the river and, consequently, the percentage of total costs to be borne by West Sacramento.

On another hand, another provision of the MOU provides that costs associated with building the streetcar facility are to be borne 50/50 by the two cities. Which begs the question: was the $10.2 million additional cost of building the Riverfront St. spur treated by the parties as a cost of laying track or as a cost of building the streetcar facility? If it was the former (as it should be), the cost is being appropriately borne by West Sacramento. If it's the latter, Sacramento property owners would be unfairly stuck with 74 percent of the unnecessary additional cost of building the Riverfront St. spur (instead of building the streetcar facility under the W/X Freeway using existing Light Rail lines), while Triangle District developers, who are apparently not paying any streetcar tax assessment on their Triangle District holdings, stand to realize potential benefits of a new streetcar line passing near their property.

The Extraordinarily High Cost of the Streetcar Facility: $15.9 Million

It is not clear why the estimated cost of the streetcar maintenance and storage facility is so high - $15.9 million. One idea that project participants should consider (if they have not already) to reduce the costs would be to locate the streetcar facility in the Downtown Railyards.

The California Railroad Museum in Old Sacramento, in a not too distant future, will have its own restoration and maintenance facility in one of the cavernous SP Railyards buildings in the Downtown Railyards. In order to handle the restoration of historic rail cars and engines, this facility may have maintenance equipment superior to that destined for the streetcar maintenance facility. It will also have ample room to store idle streetcars. It is certainly much closer to the proposed streetcar route than the south Riverfront Street site or the W/X Freeway site. Why not share the Railroad Museum's maintenance and restoration operations with the streetcar system, potentially savings millions in construction costs? While this idea certainly should have been 37 considered when potential sites for the streetcar facility were being evaluated, it isn't too late to pursue it, particularly given the wealth of knowledge and experience of crews working with the Museum.

Worrisome Lack of Conditions to Use of Property Tax Assessments

Normally, in structuring the financing of a major project involving multiple funders, the contributions of each participant are subject to certain conditions precedent. In other words, unless conditions A, B and C are met, a given participant is under no obligation to contribute his capital into the enterprise. These conditions are imposed to protect the financial interests of the participants against failures by other parties to perform or from surprises in the expected costs of the project.

As currently structured, the creation of a Community Facilities District and the levy of a streetcar tax assessment on property owners are not subject to any apparent conditions. Without establishing express conditions to the streetcar tax levy, property owners are exposed to the very real risk that they'd have to continue to pay tax assessments for 40 years even if one or more of their project partners fail to pony up all (or any) of their anticipated share of the costs or in the event costs rise significantly before ground is broken on the construction of the system, leaving the project starved of capital and requiring property owners to either: (a) put more money into the project via higher assessments; (b) accept a major cutback in the scope of the project, which could affect its viability and appeal; or (c) shutdown the project.

A protective set of conditions should include:

(1) Assurances that the tax assessment would terminate and the project cancelled if any participant failed to contribute their anticipated share of the project's construction costs by a date certain; (2) Assurances that constructions contracts be based on fixed prices and include adequate payment and performance bonds; (3) Controls over change orders that add too much to the total cost of the project; (4) Prohibitions on the use of project labor agreements that needlessly drive up construction costs by effectively preventing non-union contractors from bidding on work; (5) Competitive bidding of all work; (6) No cuts to the planned streetcar route in response to cost overruns without owner approval; (7) Satisfactory contractual undertakings by local governments to cover construction cost overruns; (8) Approval of all financing district bond financings; (9) Completion of acceptable plans for how the streetcar system will be managed and the governance structure of the nonprofit entity that planners indicate would manage the system; and (10) Approval of construction budgets and pro forma operating budgets.

The City should create a mechanism for property owners to select representatives to serve on a Property Owners Oversight Committee that would protect owners' interests in the development during both the construction and operations phases of the project. Relying solely on the judgment of city staffers to make decisions on such matters provides owners little comfort that their interests will be responsibly protected over time.

38 Cost Overruns After Construction Has Begun: Who Will Be Responsible?

The risk of major cost overruns after construction has begun is entirely different problem. By that point, it's too late for property owners to back out their tax obligations unilaterally on the basis of a failure of condition. This is not merely a theoretical risk. In the past year, the streetcar proposed for Arlington, Virginia, was cancelled due to concerns with rising costs, while a streetcar project in Austin was cancelled by voters and the project in San Antonio was nixed by elected officials.

Because so little information about the details of the Sacramento streetcar project have been released, it is not at all clear who would bear responsibility for construction costs overruns that arise after ground is broken. The documents we've examined appear to provide that Sacramento and West Sacramento will bear responsibility for covering operating deficits once the project is operational, with Sacramento bearing 71 percent of operating deficits and West Sacramento bearing 29 percent of such deficits (based on the relative ratio of miles of track constructed in each city). But we have seen no indication that the cities have agreed or will agree to bear responsibility for construction cost overruns based on such percentages or at all.

Will Contingency Reserves Be Adequate to Cover Construction Cost Overruns?

While Kirk Trost, an attorney with SACOG, which is acting as the overall project manager for the streetcar project, told a reporter for the Sacramento Bee last month that the $150 million construction budget for the project has numerous built-in contingencies "that will handle any surprises," how can property owners or the public have much confidence in such statements? How many times have we heard advocates for major public works projects give assurances that contingency reserves will be adequate to handle all contingencies, only to see cost overruns swamp available reserves and require taxpayer bailouts?

A staff report prepared for a January 13, 2015 Sacramento city council meeting included an eight-item table of proposed uses of funds that specifies that $14 million of the $150 million raised for the project will be set aside in an "unallocated reserve," representing just 9.33 percent of the total estimated project cost. (The City has not publicly released detailed capital or development budgets for the project.)

Given: (1) the track record of streetcar cost overruns in other U.S. cities; (2) Sacramento's own experiences with construction cost overruns on local transit projects; (3) the complex nature of the project; (4) the involvement of six different local governments in the project; and (5) the fact that the project is being managed by SACOG, which has limited experience in the direct management and oversight of transit construction projects, we do not believe that a contingency reserve of less than 10 percent of projected total costs is adequate to protect property owners, who will be subject to tax assessments for 20% of the total project costs, or to protect Sacramento taxpayers, who will bear the burden if the City's general fund is tapped to cover construction cost overruns.

We draw the readers' attention to the cynical but truthful statement of former Assembly Speaker and former San Francisco Mayor Willie Brown which also appears on the cover of this report:

"In the world of civic projects, the first budget is really just a down payment...The idea is to get going. Start digging a hole and make it so big, there's no alternative to coming up with the money to fill it in." 39 The Certainty of Annual Streetcar Operating Deficits and Sacramento's "Fiscal Cliff"

The great majority of transit systems in the United States operate with significant operating deficits, with operating costs of labor, maintenance, fuel, etc., far exceeding revenues received from the fare box. Typically, only one-fourth of operating costs are covered by fare box revenues, with the remainder of costs covered by subsidies from taxes and grant revenues.

Proponents of the streetcar plan are projecting that the system's operating costs will total $4 million per year. However, project planners have failed to update (increase) this estimate in three years to reflect increases in labor, electricity and other costs. Proponents have also not revealed whether they plan to charge fares for riding the streetcar or whether it will be free to ride, although we've received one unconfirmed report that the system will charge $1.50 per boarding. Without confirmation on project fares, if any, it is unclear whether the projected $4 million annual operating deficit is net of anticipated fare revenue.

Streetcar systems in other cities have experienced problems with unexpected increases in operating deficits, forcing city general funds to come up with funds to cover the deficits. Tucson's projected operating deficits quadrupled in two years - before the line even opened. As noted above, the City of Sacramento is slated to bear 71% of the system's operating deficits. So, if the system performs as projected, it appears that Sacramento's general fund can expect to pay $2.84 million of the $4 million projected total operating deficit (assuming the $4 million deficit estimate is net of any fare revenues). Given that the system's $4 million projected operating deficit hasn't been updated in three years and the inevitability of future increases in labor and other costs, it is likely that the operating deficit will be much higher initially and will rise even higher after that.

If Sacramento's share of annual operating deficits increases from $2.84 million ($85 million over 30 years) to, say, $5 million ($150 million over 30 years), will Sacramento's general fund be able to bear the added costs? It is not at all clear that it could. Sacramento city manager John Shirey has given fair warning that the City's general fund is headed off a "fiscal cliff" in 2019 and 2020 due to rapidly increasing mandatory CalPERS contributions, employee salaries and retiree health care costs, and the March 2019 expiration of a temporary half-percent increase in the City's sales tax rate (Measure U), when annual deficits of as much as $50 million are projected.

Additionally, the City's general fund, beginning in 2017, will begin to feel the full financial brunt of Arena bonds that are slated to be sold this year to finance the City's cash contribution to the Arena project. Payments on the Arena bonds, net of scheduled Arena lease income, will be over $15 million annually, adding major stress on the City's general fund. The City also is entertaining proposals (or has already committed, in some cases) to help fund a new or renovated community theater, a new performing arts center, a new children's theater, the new Powerhouse Science Center and other projects that may have considerable impacts on the City's general fund.

Sacramento is in the sixth year of the current economic expansion (albeit a very anemic expansion), with its general fund revenues only slowly increasing. If the economy slips back into recession and general fund revenues again fall, the toxic combination of the coming "fiscal cliff," the city's expanding financial commitments to other civic projects, rising labor costs from recent generous labor contracts, and falling general fund revenues will put the City into crisis mode, where all but the most essential expenditures will be slashed to preserve core city services. Since operating a streetcar line is not a core city service, Sacramento may very well terminate its annual subsidy of the streetcar's operating subsidy, whether it is $2.84 million or $5 million per year. 40 Where would that leave West Sacramento and Downtown and Midtown property owners? Would West Sacramento be either willing or able to make up for Sacramento's share of the streetcar's operating deficit? If not, the system would likely be shuttered, with property owners still on the hook for the streetcar tax assessments to service the bonds sold to fund the system's construction. With no change in Sacramento's free-spending budgetary policies in sight, the risk of the City being unable to fund its share of the streetcar system's operating deficits remains very real.

Given the track record of construction cost overruns, operating cost overruns, overly optimistic projections of ridership and fare box revenues in streetcar projects in other U.S. cities, as well Sacramento's own experience with significant costs overruns in building transit projects, EOS recommends that the City of Sacramento engage an independent, disinterested and experienced public transit consulting firm to review all cost estimates and revenue projections involved in the project before proceeding further.

We are mindful that there is the perception, if not the reality, that the federal funding window for streetcar projects may be closing with change in partisan control of Congress. But the fact that federal funding may be easier to obtain now than it will be one year from now is not a justification for failing to do the due diligence that circumstances require.

IX. FUTURE CONCERNS

Challenge of Coordinating Six Governmental Jurisdictions

Although federal funding may materialize, the proposed Streetcar system has a potential for an octopodic turf tug-of-war involving its project partners. The streetcar system is comprised of six (6) governmental jurisdictions: (1) Sacramento Area Council of Governments (SACOG); (2) City of Sacramento; (3) City of West Sacramento; (4) Sacramento Regional Transit District; (5) Yolo County Transportation District; and (6) CalTrans (controls Tower Bridge); Six separate bureaucracies now under one tent, with SACOG designated the “Sponsoring Agency” for this governmental coalition. SACOG, around since 2003, was chosen because it is the Sacramento region’s transportation planning and funding overseer. SACOG’s region includes six counties and twenty-two cities.

But can these six jurisdictions, which have existed individually for decades, work collaboratively together, especially when the conceptual stage of this project transitions to the construction and operational stages? Can they work together when it comes to identifying and rectifying heavyweight problems, such as labor disputes, funding shortfalls, and allocation of maintenance responsibilities? Can these six agencies, with SACOG acting as the sponsoring agency, be able to referee funding issues between partner governments when cash needs fall short?

Several of the existing and under construction streetcar systems have had difficulties solving budget shortfalls. For example, Seattle’s SLUT line (South Lake Union Trolley) has had to ask the City Council three times for extra operational funds. If there is an operations or construction account shortage, will SACOG be able to get both West Sacramento and Sacramento to cough up their shares of the shortfall?

We have been unable to find any other city that has six separate and distinct governmental entities involved with their streetcar systems. Most have two entities, a municipality and a transit authority. Portland has a non-profit entity, Portland Streetcar, Inc., running its streetcar operations. 41 TriMet, Portland’s transit system manager, like our RT system, has the operational responsibilities for all of Portland’s transit systems, including buses, light rail, and the streetcar. Thus, Portland has just two government agencies involved with their streetcar system, with its one non-profit operating the system. And even with this governmental overlap set-up, it has had operational problems as noted in a recent audit by Portland’s city auditor. The auditor's findings include failures to meet goals (ridership, etc.) and failures to have accurate means of measuring those goals.

Lack of Budgeting for Car Replacements

One concern with the plan for the streetcar system is that it does not appear to include a budget reserve to cover the costs of replacing the cars or performing major renovation on them once they reach the end of their useful lives. One challenge is that there does not appear to be a great deal of information available on what the expected useful life of the cars will be. While the tax assessment to build the starter line extends for 40 years, if the streetcars themselves require replacement in 25 years, property owners can expect a call for a further, additional tax assessment to cover the costs of buying replacements cars, while still paying off the old assessment.

HDR Engineering, which is serving as the principal consultant on the Sacramento streetcar project, has advised that the expected useful life of a streetcar is 25 years (about twice the useful life of a typical bus), but that it could be extended to 40 years with more maintenance. Property owners can perhaps take some comfort from Philadelphia's SEPTA system, which is reportedly still using streetcars built in 1947, while most of San Francisco's supposedly ancient cable cars were built in the 1990's, making them less than 20 years old.

City's Fanciful Plan to Build Nine Additional Streetcar Lines

The Sacramento streetcar project includes much more than just the $150 million “starter line.” There are also nine future streetcar lines on the drawing boards, scattered throughout Midtown and points beyond. The lines are labeled as Routes A through I. One line (Route C) starts from 5th & H, jogs back to 3rd Street, heads south to Broadway, then ends at Broadway and 19th, blocked by the UP rail line. Another (Route B) is a one-block loop going from L St, south on 15th to Broadway, then heads north up 16th back to L. This appears to be a loop to nowhere. Another route (G), starts at 19th & J, goes east to Alhambra Blvd, then south to L back to 19th. One big problem. There is no mention of how Route G will connect to the starter line at 19th and J. Why not? Again, there is that problem of crossing the UP line.

Although the starter line is pegged at $150 million, the other nine lines are shorter. Assuming (conservatively) that each line will cost only $50 million, the total estimated cost would be $450 million to complete the nine envisioned routes. How the City expects to finance such a tremendous cost in the face of Republican majorities in Congress who have little appetite for funding urban streetcar projects is not explained. It is also not explained how a city facing a chronic shortage of police officers, a high crime rate, a badly deteriorated park system, rapidly rising costs for pensions and retiree health care costs, neglected utilities infrastructure and assorted other very pressing issues could choose to lavish funding on nine streetcar lines costing $450 million.

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