KC Streetcar TDD Will Not Raise Enough Money for Expansion

According to the newest plan for the Kansas City Streetcar expansion, there is a $30 to $50 million gap between what the streetcar’s transportation development district (TDD) will raise and the actual cost of the project.

We have written before that the Kansas City Streetcar is an exceptionally expensive and inefficient transit device. We have also warned that the claims of streetcar induced development are, at best, premature. Now we learn that, according to a streetcar plan that the City Council passed last week, no one knows how Kansas City will pay for the project.

The proposed TDD includes a 1% district-wide sales tax and a new tax for properties within 1/3 mile of the streetcar track. That new property tax ranges from 40 cents per $100 of assessed value, to $1.04 per $100. One might note that the $1.04/ $100 rate is on city-owned properties, which Kansas City residents will pay through taxes somehow. The consultants who created the TDD calculate that available revenue for debt service from property and sales taxes will be $177 million, but the capital costs of the streetcar extension plan are around $515 million.

How does $177 million pay for $515 million? First, the planners assume that the city will pay the utility costs of the project from other revenue, or about $28 million dollars. That lowers the project cost to $487 million. Then, they assume the federal government covers half the plan, which, as the authors point out, is not guaranteed.  That leaves a funding gap of about $53 million. The study further reduces this gap through contributions from the city’s Mass Transportation Sales Tax, which essentially means they will divert funds from KCATA. They also plan to offset costs with rider fares (they optimistically assume revenue of $2,000,000 per year, much better than some other streetcars). With those additional funding sources, the gap is only $31 million.

Where will the streetcar get that extra $31 million? There is no answer to that. The consultants hope that increased economic activity from the streetcar will raise TDD revenue, but that is risky. Among the proposed revenue sources they claim could be used for the streetcar: various federal grants, Missouri state tax credits and grants, the city park capital improvement fund, a city gasoline tax, new TIF districts, private foundation grants, among many others.

To sum it up, a large TDD that imposes a 1% sales tax and property tax increases will not fully fund the streetcar (even with the federal government already paying for half), and the planners know it. Unless the federal government is willing to pay the balance, Kansas City or Missouri tax payers will be expensively called on in some way to make up the difference. All in all, the funding section of the streetcar plan should have been called “here be dragons.”