Detroit City Council approves bond sale to build Woodward rail line

Posted on April 11, 2011

All of the required local matching funds needed to qualify for federal money have been arranged for the $520 million light-rail project on Woodward Avenue.

The Detroit City Council this morning unanimously approved a resolution that authorizes the sale of up to $125 million in bonds for construction of a portion of the line.

About $73 million from the sale of Capital Grant Receipts Revenue Bonds will be used to cover the city’s portion of the rail project, and the remainder will be spent on capital purchases, such as new Detroit Department of Transportation buses.

The city has worked out an agreement with the Federal Transit Administration that allows DDOT to use about 30 percent of the $26 million to $28 million it gets annually from the FTA’s Section 5307 grants to be used instead for debt service payments on the bonds.

The bonds are expected to cost the city $10 million annually over 15 years.

City CFO Norm White, who is heading the rail project for Mayor Dave Bing, updated the council last week about the Woodward plans. The council approved the bond sale today without discussion, said Bob Berg, a partner and vice president of Detroit-based Berg Muirhead and Associates, which does media relations work for the city.

The council also approved the transfer of a $25 million federal transportation stimulus grant to DDOT. The Transportation Investment Generating Economic Recovery grant for the rail project was awarded last year to the Michigan Department of Transportation — Woodward technically is a state highway.• The line, which is a 9.3-mile loop, would run from Hart Plaza to Eight Mile Road. Construction could begin this year or early 2012, and the line would be completely operational by 2015.

The project is a joint effort by the city and the private-investor consortium M1 Rail, which has assembled $100 million in cash and tax credits to build the stretch from Hart Plaza to West Grand Boulevard.

A deal worked out last year in Congress allows DDOT to use the private money as part of the local match needed to qualify for federal funding that would account for up to 60 percent of the remainder of the line’s capital costs.

The rail plan is expected to qualify for the funding under the FTA’s New Starts program, which is aimed at partially funding qualified local fixed-guideway transit projects such as rail.

The federal government has been expediting the project’s regulatory process, trimming it to about a year instead of three, and a decision on final funding from Washington could happen this summer.