An artist’s rendering shows what the proposed Milwaukee streetcar would look like near the Milwaukee Public Market downtown. Credit: City of Milwaukee

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The Public Service Commission decided Wednesday it was unreasonable for Milwaukee to require utilities to pay the relocation costs for the proposed streetcar project, making the city responsible for those expenses.

The vote was 2-1, with PSC Chairman Phil Montgomery and Commissioner Ellen Nowak, both appointees of Gov. Scott Walker, voting in favor. Commissioner Eric Callisto, who was appointed by former Democratic Gov. Jim Doyle, voted no.

"We clearly have jurisdiction to declare such municipal regulations void," said Montgomery, adding that the PSC's vote "will add clarity and finality to these proceedings."

"Though I'm not operating under any delusions that a final decision won't be litigated, it could provide the reviewing court the benefit of our perspective," he said.

Mayor Tom Barrett said he was not surprised by the PSC's decision, saying it "continues to politicize a local public works improvement project."

"The PSC and state Legislature believe that private investor-owned utilities, which use publicly financed roadways for free, should be given special treatment when it comes to public improvement projects in Milwaukee. We disagree," he said.

The Milwaukee city attorney's office said in a statement that it would recommend an appeal in Circuit Court. The statement said the "utilities' obligation to relocate or modify their facilities at their expense is derived from state law, not a municipal regulation that the commission may invalidate."

Montgomery said that while the city considers the new state law signed by Walker that barred utility ratepayers from having to bear any costs for a streetcar, "I don't think the constitutional challenge can or should stand in our way. We must presume it's constitutional."

Montgomery rejected the city's argument that it has powers that are beyond the scope of "municipal regulation" defined in the state law, and that the law plainly says that the costs for a streetcar — "whether these costs are $10 or $10 million — cannot be passed along to utilities and their customers."

Callisto said he thought the commission's action wasn't warranted, saying the Legislature and Walker interjected themselves into the streetcar debate when they passed the bill.

Brett Healy, president of the MacIver Institute and the person who filed the original petition as a ratepayer, said he was happy with the decision.

"It's common sense that utility customers throughout southeastern Wisconsin should not be forced to pay for this project. And I'm glad the PSC agreed with me," Healy said.

Nearly two years ago, the PSC appeared to be moving in the direction of requiring the city and utilities to share the costs of moving utility lines for the streetcar project. The city argued that state law gives it the same right to require utilities to pay relocation costs for a streetcar project as for a roadway project.

Last summer, though, Walker added a new element to the case when he signed into law a measure that barred utility ratepayers from having to bear any costs for a streetcar.

Last fall, Healy's attorneys asked the PSC to decide once and for all whether the project can proceed.

Earlier this year, the Federal Transit Administration said the streetcar proposal would not have a significant environmental impact. And last week the city received a $3.18 million federal grant for the project, which will be administered by the state Department of Transportation. The grant is to be used to improve air quality and reduce traffic congestion.

The city has allocated $64.6 million — $54.9 million in federal aid and $9.7 million from a tax incremental financing district — to pay for construction of a modern streetcar line. The first phase of the route has streetcars traveling south on N. Broadway and north on N. Milwaukee St., between E. Wells St. and E. St. Paul Ave.

The change to a split route on Broadway and Milwaukee was made to "eliminate impacts to the regional communications hub and impacts to the steam facility, gas mains and electric facilities," City Engineer Jeff Polenske wrote in a PSC filing.

The costs to relocate utilities initially had been estimated at $55 million to $65 million, but Barrett said those costs have been reduced to approximately $20 million.

"In order to drive the costs down further, we expect even more cooperation from the utility companies than we have had to date," Barrett said.

The case dates back to October 2011 when Healy first filed a petition with the PSC as a ratepayer. He asked the PSC to rule the city cannot require the utilities to pay relocation costs, arguing that he and other suburban ratepayers should not have to pay any part of the cost of a city project. Utilities such as We Energies and AT&T and other utilities then joined the case, as did additional individual petitioners.