The Loop Trolley Co. has notified key local officials that the long-delayed line won’t begin operating unless it gets a new infusion of $500,000 to cover startup costs and initial operating deficits.
The nonprofit firm will be insolvent by January because of recurring delays in completing construction and testing and getting approval from federal and state regulators, Loop Trolley Co. President Les Sterman said in an Oct. 19 letter.
The letter, to St. Louis County Executive Steve Stenger, St. Louis Mayor Lyda Krewson and others, cast new doubt on chances for success for the line, which would run between the west end of the Delmar Loop in University City and the History Museum in Forest Park.
Even when regulators finally give the go-ahead to start service, Sterman said, it would be “irresponsible” to do so without the extra money.
One problem, he said, is that trolley managers and employees were hired in anticipation of the line’s starting operations months ago but the delays have kept any farebox or sales tax money from coming in to help pay their salaries.
“We regret that we are unable to begin revenue service under the current conditions, but we have no choice, given the financial circumstances resulting from delays in completing the project,” Sterman said in the letter.
Sterman added, however, that trolley advocates remain confident about the trolley’s long-term financial sustainability, supported only by passenger fares, the special local sales tax in the trolley area, income from ads and private donations.
Joe Edwards, the Loop businessman who has been the driving force behind the trolley idea since the 1990s, had asked county officials last summer for the $500,000. But he didn’t say that the line couldn’t start without it.
Edwards said earlier this week that he hoped that the trolley could begin operating by mid-January or mid-February but that the actual start date was unknown.
Sterman, a former executive director of the East-West Gateway Council of Governments, told the Post-Dispatch on Friday that he had yet to get a response to the letter but that he felt “pretty confident this is going to get worked out.”
But several public officials expressed reservations about providing additional funding.
Stenger said Friday that trolley backers still hadn’t convinced him of the need for the extra $500,000 and pointed out that the county had already kicked in $3 million in 2015.
“They need to present a better case for me, considering that we’ve already provided quite a bit of money to this project,” he told the Post-Dispatch.
He added that “there are many sources of funds in our region so I’d encourage them to examine all of their possibilities.”
Krewson said it would be “very tough” for St. Louis to come up with the money requested. However, she said she believed some solution would be reached so the trolley could begin operations when it was technically cleared to do so.
“We’re all going to collectively try to figure out how to fill that gap, and there’s not an answer to the question today,” she said. “We’ll get it figured out.”
Krewson and Stenger are on the board for the transportation development district formed to build the trolley line and oversee the special sales tax helping fund construction. The separate Loop Trolley Co. was set up to operate the line; it is to get sales tax revenue once operations begin, Sterman said.
Also getting the letter were the three other district board members — Edwards, the chairman; University City Mayor Shelley Welsch; and John Nations, president and CEO of the Bi-State Development Agency.
Welsch said University City had already channeled $250,000 to the project. “I do not feel there is stomach, I guess you would say, on the (city) council to provide any more funding,” she said.
She said she hoped the County Council would consider the $500,000 request and use some of the millions of dollars in unspent revenue from a countywide sales tax for transit.
She said also that it was “imperative” that the project succeed because the region’s ability to get federal funds in the future could be at stake.
The federal government has provided $33.9 million of the $51 million cost of building the line and related improvements.
In addition to the $500,000 infusion, Sterman asked the district board to immediately begin sending sales tax money to Loop Trolley Co.
He also wants a St. Louis development agency to defer for several years the $75,000 annual fee it gets to manage federal tax credits aiding the project. Krewson said that was a possibility.
In 2012 when the federal government gave final approval to release of a key $25 million grant for the project, local officials said they expected the 2.2-mile line to be rolling by mid-2014.
Sterman said in the letter that “constantly shifting dates” for completing construction and delivery of trolley cars made it very difficult to plan for hiring.
When Loop Trolley Co. was advised by the district to expect service to begin last April, the firm hired management staff months in advance. When the start date was changed to September, he said, trolley operators and dispatchers were trained and hired.
“Now that milestone has shifted again by at least five months,” he said of the potential start date.
He said Loop Trolley Co. had taken various steps to deal with its financial problem. He said about $310,000 had been raised since 2011 in private donations, much from the firm’s own board members. He said that included a significant amount from Washington University.
In the letter, he also said Loop Trolley Co. had gotten two $100,000 loans from trolley supporters. Asked by the Post-Dispatch to identify those lenders, Sterman declined. He said the loans did not have to be repaid until 2023.
In the letter to public officials, he also cited other reasons for Loop Trolley Co.’s startup financial problems, such as its covering $300,000 in capital costs normally included in a construction budget.
That includes a better fare collection system than was originally planned and additional security at Loop Trolley Co.’s maintenance facility.
He added that $500,000 had been removed in 2014 from Loop Trolley Co.’s budget and shifted to the district’s construction budget.