State forgives $3.5M loan for Detroit's QLine in exchange for ad rights on street car

The state of Michigan will forgive $3.5 million remaining on a $10 million taxpayer-funded loan made toward the construction of Detroit's QLine in 2014 in return for the right to advertise on the side of the street car.

The Michigan Strategic Fund board on Tuesday voted unanimously to forgive the $3.5 million remaining on the loan to the nonprofit M-1 Rail, noting the QLine needed to have balanced books before it could be taken over by the Regional Transit Authority.

In exchange for the loan forgiveness, the state will be able to wrap the streetcar with ads or run "static video content" at the 20 streetcar stations. The state argues the advertising opportunity is worth about $4.8 million.

"By allowing for an alternative way of repaying the Michigan Strategic Fund loan, this board's action today is an essential piece of the puzzle for how we make the QLine financially sustainable and that transfer possible," said Lisa Lisa Nuszkowski, the president of M-1 Rail.

The fiscally conservative Mackinac Center for Public Policy predicted the loan forgiveness authorized Tuesday would not be the last time taxpayers pitch in for the 3.3-mile track.

"Writing off a piece of a special loan is not going to sink the state nor rescue the small street car," said James Hohman, director of fiscal policy for the Mackinac Center in Midland. "The line will continue to be a drain on state and federal taxpayers until lawmakers rethink transit payments to better help people get where they want to go."

Officials are working on a plan for the Regional Transit Authority to assume ownership and operation of the system this summer, but the deal requires the QLine to have a balanced budget, Nuszkowski said.

The amendment to the state loan approved Tuesday would replace the repayment structure for the remaining $3.5 million with an "acknowledgement rights model" that allows the state to place ads on the QLine.

The M-1 Rail, which owns the QLine, was structured as a nonprofit during the Detroit bankruptcy and supported by state and private philanthropic money for the past decade, with the ultimate goal of donating it to a public entity.

Because of its status as a nonprofit, M-1 Rail has not been able to qualify for traditional state or federal transit dollars.

The street car opened to riders in 2017 as a 3.3 mile system that runs along Woodward Avenue from downtown to the New Center area and initially relied on private funding and rider fees. The Legislature stepped in in 2020 when the COVID-19 pandemic shut down the line and cut off rider revenue.

In 2022, Whitmer signed legislation that gave $85 million in tax subsidies to the QLine through 2039, about $5 million a year for 17 years. The legislation extended a $5 million annual appropriation lawmakers first put toward the street car in the fall of 2020.

At the time, it was believed the annual $5 million subsidy would make up more than half of the QLine's $9.9 million in operating costs in fiscal year 2022.

Dan Gilbert's Rocket Mortgage, which helps to offset costs for the QLine alongside Penske Corp. Chairman Roger Penske and Troy-based Kresge Foundation, lobbied the Legislature for the additional funding.

eleblanc@detroitnews.com