IN A CLASH of priorities for Mayor Charlie Hales, longtime plans to fix the streetcar system's last major bottleneck—a vexing stretch of single track at SW 4th and Montgomery—may have been snagged by ongoing questions about the future of urban renewal in Portland.

And solving that impasse, the Mercury has learned, could force Hales and his colleagues to dip further into the city's newly announced $14.1 million surplus.

According to a budget review obtained through a records request (and first revealed by the Mercury), the Portland Development Commission has warned it might yank all but $200,000 of the $1.4 million in urban renewal funding previously pledged for the $3.8 million project. A much-ballyhooed Portland State University urban renewal area, created last year, had been designated as the source of that withheld cash.

The streetcar project, because of that change, is now facing a $1.6 million shortfall—as well as fresh questions about whether it will be built on time, or at all.

"It's essential," says Rick Gustafson, executive director of Portland Streetcar, who told the Mercury he only learned of the potential shortfall last Thursday, October 31.

"I had no indication prior to that," he says.

A major question is whether Hales wants to back away from the new PSU district. The mayor has made no secret he's been interested in rethinking the layout and longevity of the city's urban renewal areas. In an interview with the Portland Tribune, Hales raised particular questions about the PSU urban renewal area—a prized victory for his predecessor, Sam Adams—and whether it's the best way to help PSU grow.

Shawn Uhlman, a spokesman for the PDC, confirmed his boss, executive director Patrick Quinton, would be meeting this week with Hales. The issue was left to simmer, like several others, while the mayor spent several days in China on business. But Uhlman stopped well short of directly linking Hales' public thoughts on redevelopment to the funding crisis.

"Everyone knows the mayor is looking at urban renewal," Uhlman says.

A spokesman for Hales, Dana Haynes, also wouldn't confirm or deny an explicit link to the mayor's past comments. He said the mayor had merely asked to consider other funding options for the streetcar project and that relying on the PSU urban renewal area might still be "the only game in town."

"That doesn't mean he isn't going to ask for more extensive analysis of all the URAs," says Haynes. "He would and should and will. But not this week."

Meanwhile, the city budget office has begun looking to a range of alternatives, including whether it makes sense to tap into the city's surplus money. That possibility helped delay a vote on how to divvy up that money until November 13. The budget office had already prepared an 82-page report on other surplus funding requests—bids to retire city debts and pay for homelessness programs—by the time the streetcar project became part of the conversation.

Other suggestions for the streetcar work are even more politically fraught. They include funneling a different spigot of urban renewal money through the Portland Bureau of Transportation (PBOT), using PBOT parking revenues to pay for the work (taking the money from other projects), or abandoning the streetcar work altogether.

That last option is the least likely. As the review notes, the city would have to repay some $2 million in state grant money it's already begun using to pay for design work. And streetcar officials are adamant they can't fully develop the system—and increase capacity and frequency—until two sets of tracks run through 4th and Montgomery.

The streetcar work has been in limbo ever since the Oregon Sustainability Center, another Adams priority, went belly up last year. When the building was still viable, the plan was to run the double-track diagonally through its ground floor. Later, when the state balked at its share of the project, planners had to rethink the streetcar realignment.

"This was a sudden action, which has significant ramifications," says Gustafson. "It's very important that this be resolved."