Omaha mayoral candidate wants to slam the brakes on the city’s streetcar. What would it cost?

Early in the 2025 Omaha mayoral campaign, one candidate made a bold promise.

Mike McDonnell, a former South Omaha state senator, said he would stop the “streetcar named disaster.” Or at least put it to a vote.

Other candidates echoed McDonnell’s criticism of the $459 million project, but said it is too far along to derail. Mayor Jean Stothert said doing so would carry “devastating” effects.

The city has already paid at least $43 million for the project, according to the city. That is money that cannot be recouped if the city pulled the plug on the 3-mile train that would run from midtown to downtown primarily along Farnam and Harney streets. 

Contracts signed by the Omaha Streetcar Authority commit the city to paying nearly a hundred million more.

But city officials, in response to questions from Flatwater, said the costs of canceling the project would be far greater: budget cuts and tax hikes, paused public safety projects, a damaged bond rating, and threats of lawsuits from contractors, developers and bondholders.

McDonnell, a Republican who left the Democratic party in 2024, said the dire picture painted by the city sounds more like political spin than straightforward legal analysis.

The real cost, he said, would be completing a project residents don’t want. A survey released in 2023 by Heartland Strategy Group, where McDonnell’s campaign manager is a partner, showed strong opposition to the streetcar. Stothert, a Republican vying for a fourth term this spring, said the poll was “misleading” and showed nothing.

“A lot of their comments show me that they don’t understand (how we’re paying for the project), they don’t understand the city budget and they don’t understand the streetcar,” Stothert said of claims made by her opponents.

The transit line, which would be free for riders, would carry annual operating and maintenance costs of $6.4 million, paid for by parking fees, according to the Omaha Streetcar Authority. The project’s currently estimated to cost the city $389 million with $70 million in infrastructure improvements to be paid by others. The city estimates it would generate at least $940 million in revenue.

The city will have to pay for work that’s already been done, McDonnell said. He did not have specific figures for how much the project would cost the city if it was canceled.

The Streetcar Authority, a board made up of city, Metro Transit Authority and Greater Omaha Chamber of Commerce appointees, has signed 19 contracts totaling nearly $141 million, according to the city.

Some are big: nearly $48 million to an international railcar manufacturer to buy six streetcars similar to the kind running in Kansas City, according to Streetcar Authority documents.

Locally the big contract holders are HDR, which signed contracts worth nearly $29 million for design and oversight; Hawkins Construction Company, which signed contracts worth $31 million to work on the Harney and Farnam street highway bridges; and Sampson Construction Company, which signed a contract worth $26 million to build a maintenance facility.

Hawkins Construction and Sampson Construction did not respond to emails and phone calls. HDR declined to comment.

McDonnell said the city can renegotiate contracts and find other work for the companies that have penned agreements with the city. He doesn’t believe those will be hard discussions if the project is put to a vote — something he said Stothert promised in the past.

“If we let the people vote, and I’m wrong, then I’ll work night and day to make the streetcar successful,” he said. “I just don’t believe I’m wrong.”

Stothert said she would have put the project to a vote if it had required new taxes, which it doesn’t. People have had opportunities for public input as it cleared hurdles in the Omaha Planning Board, Omaha City Council and Omaha Streetcar Authority, Stothert said. 

That work, she believes, can’t be undone by a mayor — City Council would have to put the issue on the ballot. 

Other candidates said while they don’t like how the streetcar came together, the city missed its shot at canceling the project.

“I don’t believe that it is possible to stop it without significant loss to the taxpayers,” said Democratic candidate John Ewing.

While the city should have been able to vote on the project, at this point it needs to stay the course, said Ewing, the current Douglas County treasurer.

Democratic candidate Jasmine Harris said the focus should be on how to make the streetcar work for more people who use public transportation for work, medical appointments or grocery trips.

“It’s cute until we can make sure that people can actually use it in their everyday life, not just the weekend,” Harris said.

Stothert said studies have shown the streetcar would help bring billions in development to downtown. Stopping would halt that progress and leave the city holding the bill.

“It’d be absolutely financially devastating,” she said.

The ramifications of canceling the project go even further, according to city officials, who detailed the costs and potential consequences in a four-page letter responding to Flatwater questions. 

If the city canceled the streetcar it would need to make cuts and raise taxes to pay contractors, the letter states. The city’s savings “would be destroyed” and any revenue would go toward paying debts. 

Agreements with developers that depend on the streetcar for tax subsidies would fall apart and expose the city to more claims for damages, the letter states. The city’s bond rating, essentially a credit score that affects the city’s borrowing capabilities, would suffer. 

The city’s law department would have “little room for negotiations” and would expect lawsuits, which drive up costs with claims for damages and attorney fees, the letter reads. 

The city has used more than half of the $70.8 million in bonds it’s already issued and sold to pay for streetcar work. The remainder could be used to pay contractors, but the city would owe an additional $69.8 million.

In lieu of the streetcar and related developments paying off those debts, the city would dip into its general fund and make cuts to departments, personnel, salaries and services, the letter continues. Future capital projects, like a new fire station, library, police precinct, street improvements or central fire and police headquarters, would be on hold.

McDonnell in a statement said the city’s claims are “full of loose assumptions and conjecture.” He called the idea that repaying already sold bonds “would bankrupt” the city, “preposterous.”

How to Vote in Omaha

In the “highly-unlikely scenario” the city opinions are correct, the statement reads, “then the mayor has entered into a costly and unpopular project at taxpayer expense, and failure to meet any of the revenue or development projections — for any reason — will have costly financial implications for the city for years to come.”

If Omaha canceled the project at this stage, it might be a first in the modern streetcar era, said Joel Mendez, a University of Kansas assistant professor who’s studied the transit option.

Mendez only knew of one city that proposed stopping a streetcar as far along as Omaha’s. A Cincinnati mayor, who made those promises on the campaign trail, abandoned the plan when it turned out to be too expensive.

The fact Omaha did not have a public vote is unique, he said. Just because studies show the streetcar would pay for itself doesn’t mean taxpayers shouldn’t have a say, Mendez added. “They should be considered in this process.”

But Mendez, who’s studied why some streetcar systems succeed and others struggle, said he hasn’t seen anything from Omaha’s that would typically imperil a project.

“If I had to put my money on it, I think the system is going to do well from a ridership perspective,” Mendez said.

The city expects the streetcar to spur a wave of development along its route, which will then generate the money to pay for the project through a mechanism known as tax increment financing, or TIF.

Jay Lund, principal of GreenSlate Management, which led the redevelopment of Blackstone, said stopping the streetcar would hamper much of the momentum in transforming Omaha’s urban core — a larger goal that goes beyond the streetcar.

Lund wouldn’t comment on whether he’d consider a lawsuit if the streetcar were not finished. Because his projects preceded the streetcar, none of them had the project’s completion as a condition of the redevelopment agreement, he said.

Other developers have been more straightforward about their project’s dependence on the streetcar.

In 2022 Jason Lanoha, president of Lanoha Real Estate, told the Omaha Planning Board that the $443 million Mutual of Omaha skyscraper, and the kind of workers it wants to fill it, would not come without the streetcar. The Mutual tower also received $68.6 million in TIF subsidies.

In response to questions about the potential for canceling the streetcar project, Mutual’s vice president of communications and government affairs Jim Nolan said in a statement that the company does not comment on hypotheticals. He called the streetcar a “pivotal investment” in Omaha’s growth and vitality.

“Our new downtown headquarters is just one example of the type of economic development a modern streetcar will attract,” Nolan wrote. “From Midtown to the Riverfront, linked by the modern streetcar, the potential for development in Omaha’s urban core is virtually unlimited.”

The Duo, a $163 million redevelopment of downtown office buildings into apartments, was also spurred by the streetcar. It received $26 million in TIF subsidies.

“The streetcar is the reason we’re doing this,” said Todd Heistand, owner of NuStyle Development, in a city press release. “The streetcar brings greater value to downtown development”

Heistand and Lanoha did not respond to emails.