Draft Financial Plan Says Omaha Streetcar Could Drive $3 Billion in Development | Nebraska

OMAHA — The City of Omaha continues to explore financial plans for a proposed streetcar system, but a draft analysis obtained by the World-Herald points to multiple funding avenues and new details.

The analysis also indicates that funding for the tram will be heavily dependent on an anticipated wave of new developments around the proposed route.

These details largely match a draft of the project first shared by Mayor Jean Stothert at a January 26 press conference to announce plans for the tram and a new downtown Mutual headquarters. of Omaha.

In announcing the streetcar project, Stothert said a funding plan from a Greater Omaha Chamber task force was independently reviewed by two different parties. Both confirmed that the project could be financed without a tax increase.

The draft analysis – obtained through a public records request – appears to confirm Stothert’s remarks.

The analysis, conducted by HDR, includes recommendations and information that will be considered by the city and eventually included in the final financial plan, which will ultimately need to be approved by the city council. It also details the main funding strategies.

The cost to build and launch the streetcar system is estimated at $225 million, but because federal guidelines provide for a 35% contingency in the event of unforeseen costs, the city would need to raise $306 million.

According to HDR’s preliminary analysis, the tram could spur $3 billion in development in the region along its planned route over a 15-year period. This development would generate substantial growth in property tax revenues. The city would capture some of this revenue and use the money to pay off the debt from building the streetcar.

The analysis estimates that once built, operating and maintaining the tram would cost approximately $6.4 million per year – a cost that could be covered, in part, by increased charges on parking garages existing.

According to the proposal, the streetcar will operate along a 3-mile route using 5.5 miles of track. The line runs along Farnam and Harney Streets from 10th to 42nd and along 10th Street between Harney and Cass.

Two major developments in the works would wrap up the rail system: the $400 million Riverfront Parks and Science Museum to the east and the $2.6 billion Project NExT facility at the University of Nebraska Medical Center. West.

Wherever trams have been built, they have attracted private developments that tend to exceed expectations, Stothert said in January. Omaha expects “extraordinary development” along the streetcar line, she said.

HDR’s analysis backs up that statement, citing a recent study by the Federal Transit Authority, which looked at five federally funded and operating streetcar projects across the country.

The study found that light rail projects had an immediate positive effect on property values ​​in the range of 5% to 28%. Omaha property tax values ​​rose at a historic average of 2% year over year, according to the analysis.

HDR also explored the potential pace of development and its financial impact on the project.

The analysis details three different development scenarios, including: priority or rapid development along the tramway corridor; linear development; and lagging development, which means early tram-stimulated projects are slow to start.

The backloading scenario is the least likely to happen, according to HDR. This would likely lead to a major economic recession.

Each of the scenarios results in a positive cash balance, or budget surplus, in 2051, but all three imply a net decline in revenue during the first years of tram operation.

The decline is the result of a gradual increase in revenue generation from TIF and other sources, combined with the need to cover expenses related to bond payments, the construction of the tramway and new municipal garages, and the early tram operation, according to HDR.

In the deferral scenario, the project could actually experience a multi-year deficit — years where costs outweigh revenues, according to the analysis. Revenue would eventually begin to flow as development progressed, but the city would have to find a way to cover expenses during those early deficit years.

Officials said the costs of launching the tram system and repaying the bonds will be more than covered by around $354 million generated through TIF.

Those dollars would come from three different revenue streams within a special TIF district covering the entire streetcar route, as well as three blocks north and south of the route.

New developments in the tram district would contribute 25% of their TIF proceeds. This item alone is expected to generate $218 million.

Using the authority it has under state law, the city also plans to extend the timeline of already existing TIF projects in areas deemed severely degraded along the highway from the current 15 years to 20 years. These five additional years of payments would generate $50 million.

The third portion will come from existing properties that are seeing increased valuations in the TIF district, raising $86 million.

Typically, through TIF, the developer of a city-approved project takes out a loan to help cover eligible redevelopment expenses. The loan is repaid, usually over a 15-year period, using the increased property taxes generated by the new development. Normally, property tax payments are used to support schools, city and county government, and other local tax-dependent organizations.

During the FIT period, the property owner continues to pay a portion of property taxes to local governments based on the assessment that existed prior to any improvements. Once the TIF loan is paid off, property taxes collected on the higher value improved property then begin to flow to these local governments.

Beyond the use of the TIF, the HDR analysis identified four other potential sources of funding.

According to HDR, parking fees at surface car parks are increasingly being used by other cities as a source of funding for tram systems.

There are currently approximately 19,500 surface parking spaces not operated by the City in the tramway corridor. A monthly fee of $4 per stall ($0.13 per day) would yield about $400,000 per year and $10.6 million over 30 years, according to HDR estimates.

Payments in lieu of taxes (PILOT) are payments that may be made by certain tax-exempt entities in lieu of property tax payments.

HDR found that in the tramway corridor, there are at least 11 tax-exempt owner entities. The city could establish voluntary PILOT agreements with some of the larger tax-exempt entities that would benefit from the improved connectivity provided by the light rail.

The 11 entities were not identified in the analysis, but places such as museums, churches and social service providers would be exempt from a PILOT agreement. HDR estimates this revenue potential at around $500,000 per year for 30 years.

Philanthropic contributions have been identified as a source that would help fund some of the initial design, planning and pre-construction costs, as well as any early bond debt repayments depending on the pace of development, but “it seems that the philanthropic element is no longer part of the discussion,” Assistant City Attorney Bernard in den Bosch wrote in response to the World-Herald’s request for documents.

An additional $15 million has been identified through “services in kind”. For example, the streetcar route is in an area of ​​old gas and water lines owned by the Metropolitan Utilities District that will need to be replaced in the coming years.

MUD would not have to cover the costs of opening the street and repaving if they synchronized their replacements with the construction of the streetcar.

If the tram project goes ahead, final design and pre-construction activities will begin later this year. Construction would take place from 2024 to 2025, with the tram open and operating in 2026.