Detroit charts a public-private path to its future, with streetcars

When a fleet of bright red-roofed and turquoise-roofed streetcars begins service tonight along three miles of this battered city’s central spine, a lot will be riding on the outcome.

The privately run QLINE is Detroit’s first streetcar service since the 1950s, when it tore up its rails in favor of highways. It comes as the Motor City emerges from bankruptcy and blight, amid a pickup in investment in downtown property and the construction of new sports stadiums and waterfront parks. The city’s population has stabilized; the young and curious keep coming.

To succeed, the streetcar line needs to attract regular riders to demonstrate the efficacy of modern mass transit in Detroit after decades of false starts. Its backers frame it as a first step to rethinking how residents get to work and play and how to spread development into low-income districts. One in four households don’t own cars and struggle to reach job-rich suburbs by bus.  

But the story of this $180 million project, spearheaded by nonprofits and tycoons, also raises political and economic questions that resonate beyond Detroit. Can philanthropy play a key role in solving big-city infrastructure problems like transit? Should it?

“When private entities step forward to support public projects they have influence, and we need to think about whether that’s OK,” says David Callahan, who runs the website Inside Philanthropy. 

He says foundations are supposed to do what governments can’t do; a Ford Foundation official once described philanthropy as society’s “passing gear.” But this line has blurred both in Detroit and in nearby Flint, where residents turned to charities to truck in safe water after municipal supplies were contaminated.

“We don’t want to see foundations take over the mundane tasks of government,” says Callahan, author of “The Givers: Money, Power, and Philanthropy in a New Gilded Age.”

Funders here say this project and others like it represent catalysts for a city that is finally emerging from years of near-paralysis, hobbled by financial crises and political dysfunction.

“Great communities are made by connective tissue, and this becomes one part of that membrane,” says Rip Rapson, president and CEO of the Kresge Foundation, which helped fund the QLINE.

Deep needs, big philanthropy

As elected government retreated amid the global recession and Detroit’s financial collapse, private players stepped into the vacuum. Philanthropists have paid for streetlights, neighborhood safety patrols, park maintenance, and city planning.

In 2013, after Detroit became the largest ever municipal bankruptcy, Kresge, Ford, Skillman and other foundations hatched a “Grand Bargain” to stop creditors from seizing the city’s world-class art collection and allow for an equitable payout to pensioners. The final package, including matching state funds, amounted to more than $800 million spread over 20 years, and led to a bankruptcy settlement in December 2014.

Now, Kresge is the new rail project’s largest single funder, joined by other local foundations with large endowments and by prominent businessmen like Dan Gilbert and Roger Penske.

But the generosity brings a moral hazard, says Tonya Allen, who heads the Detroit-based Skillman Foundation. She worries that it creates a precedent for philanthropy in an era of budget austerity. “I think that you will see more people leaning on private dollars that will be used to replace public spending,” she says.

The good news is that this rail line exists, unlike past city-led transit blueprints here that never got built. Detroit’s need for greater mobility as a path out of poverty were acute even before the recession that began in 2007. Desperate parents put their kids on long bus rides to better schools; workers trudged miles to low-wage jobs that their neighborhoods lacked. A city that occupies 139 square miles – the size of Manhattan, Boston, and San Francisco combined – had been whittled down to a population of just 700,000.

For residents, mixed reactions

North of downtown, the streetcar ends at Grand Boulevard, an east-west road that bisects Woodward at New Center, a modernist office complex built for, and later sold off by, GM. It has an Amtrak station, offering intercity rail connections. Two blocks from the newly painted streetcar terminus are abandoned single-family houses on weedy lots, part of the city’s huge backlog of blight. But other houses are being renovated in expectation of better days ahead.

That the QLINE will only serve the central corridor where Detroit’s business elite works and plays irks some. Critics in this predominantly African-American city ask why so much investment is going to districts where young white Millennials have moved in droves since the recession, and where backer Mr. Gilbert (owner of Quicken Loans) has bought up scores of commercial buildings.

Matt Cullen, CEO of M-1 Rail, the nonprofit that built the QLINE, says the streetcar was always envisioned as a starting point for a more comprehensive system. “We never said this was the answer to transit,” he says. He adds that streetcars only make sense in densely settled areas and that rapid buses and commuter rail can serve other districts.

At a stop near the streetcar terminus, Deborah Williamson waits for her bus home, a one-hour ride. A sleek snub-nosed streetcar passes by, on its way downtown. Ms. Williamson, an African-American retiree, says she doesn’t plan to ride the streetcar. “It’s not for me,” she says. Her son, who won’t give his name, is more dismissive, calling it a waste of money.

In a May 6 column, Stephen Henderson of the Detroit Free Press pushed back against QLINE critics, pointing to the litany of failures and the impossibility of satisfying everyone. “We've been losing so long on this [mass transit] issue, licking our wounds from disappointment so often, that I fear we don't really know what a win looks like, feels like, or means to us. This is it, folks. At least for us. At least for now.”

Part of a larger dream

The project isn’t devoid of government funding. M-1 Rail received $27 million in federal grants, as well as state and county contributions. Executives say they have raised enough money to operate it for up to 10 years or until it can be absorbed into a public transit authority that could stitch it into a regional network of trains and buses.

Ballot referenda held last November in Detroit and three neighboring counties to raise tax revenue for a regional authority narrowly failed to pass. The proposal would have created rapid bus lines to the suburbs and Detroit Metropolitan Airport, and a commuter rail line to Ann Arbor.

Mr. Cullen of M-1 Rail, who is now one of Gilbert’s top executives, says the voters’ rejection was a setback but that he expects it will eventually pass once the new streetcars become a fixture in the city. “It takes time to get people to understand the value,” he says.

A century ago, Detroit had one of the nation’s largest streetcar networks, which carried commuters from the suburbs into the city and along radial boulevards. The postwar growth of federally funded highways, backed by a resurgent auto industry, hastened the network’s decline, and in 1956, the last streetcars rolled along Woodward Avenue, before being sold to Mexico City.

Five decades later, Detroit faced a different dilemma: How to revive a depleted city that had become a byword for urban decay. Could public transit be part of the answer?

Mr. Rapson thought so. In 2006 he moved to Detroit to head Kresge, a foundation set up in 1924 by Sebastian Kresge, the founder of a retail chain that later became K Mart. Rapson is a former deputy mayor of Minneapolis and a veteran of urban policy and nonprofit work in that city, which opened a successful downtown light rail in 2004.

As the Twin Cities grew, Detroit shrank. By the time Rapson arrived, it had shed people, public services, and jobs. Its sole attempt at light rail – an elevated driverless monorail that loops around downtown – was a money-sucking eyesore.

How a plan was hatched

The year after Rapson’s arrival, he was invited to a lunch at a country club in Bloomfield Hills, a wealthy suburb. There he found himself extolling the benefits of rail to Roger Penske, the founder of transportation firm Penske Corp., and a civic leader who had brought the Super Bowl and Grand Prix to Detroit. Mr. Cullen, then a GM executive, was also at the lunch.  

Several months later, Mr. Penske met again with Rapson and told him that he had costed out a privately funded streetcar line on Woodward Avenue as the backbone of a mass transit network.

“He turned to me and said the price tag is $100m. I smiled and said that doesn’t seem too bad. He said: Well, the question is whether you’ll put in the first $35 million,” recalls Rapson.

The project quickly ran into interference from then-Mayor Kwame Kilpatrick, who was pushing a rival rail line that would run to the city limits and cost more than $500 million. Then came the Great Recession that threatened to torpedo both projects as the city and its automakers, whom Cullen had tapped for contributions, teetered on the brink of ruin. Mr. Kilpatrick was later convicted by federal prosecutors of perjury and corruption, another blow to the city’s reputation.

As the economy recovered, M-1 Rail managed to secure other funders, including by offering naming rights to 20 stations and to the line itself, named for Quicken Loans, a major downtown employer.

A 'new equilibrium' for cities?

Ms. Allen praises the resolve of M-1’s backers in steering it to completion (Skillman Foundation, which she heads, didn’t contribute). But where it runs – and doesn’t run – sends a message to the community, whether intended or not, she says.

“It’s an important symbolic step for the progress of the city. But I also think it’s symbolic in the sense that it ends at Grand Boulevard,” she says. “It feels like it’s for the business core and for visitors, and not for Detroiters.”

A deeper question, she adds, is whether this type of “workaround” for providing public goods can give way to a democratic process that is inevitably messier than going it alone using private dollars. “I think that if Detroit is going to have scaleable change then it’s going to require more than a workaround,” she says.

Rapson calls the concern legitimate. “You don’t want four guys at the country club directing the course of the community, but it never was that. It was an idea that… we took to the community.”

He says the rail project should be viewed in the context of Detroit’s meltdown. The role of foundations like Kresge was “to create a kind of scaffolding that would be sufficiently durable to hold until the public sector resumed its rightful role and the private sector began feeling comfortable again,” he says.

But the question remains of what role philanthropy should play, Rapson says, noting that two new, well-endowed foundations have been created since 2013 with a focus on Detroit. “I think what you’re seeing in resource-strained communities is a new equilibrium between the private and the public and the nonprofit.”