A streetcar system could be in the works for downtown New Haven.

The New Haven City Services and Environmental Policy Committee met Tuesday to approve New Haven’s application for two federal grants for programs to improve alternative transportation and street signs around the city.

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The first grant, which would provide $800,000 from the Federal Transit Administration (FTA), will be used to conduct an “Alternatives Analysis Study” on the proposed New Haven streetcar system. The study aims to assess whether there is a need for a new transportation method and if so, whether a streetcar would be the most effective one. It is the next requirement New Haven must fulfill in the FTA’s grant administration process and is estimated to cost $1 million. The study will also provide an opportunity to reasses the streetcar’s route, the path of which has been a source of some controversy.

The new streetcar system would run through the roughly 1.5-mile stretch of downtown New Haven. Its route would encompass Union Station, the Yale-New Haven Hospital district, and Science Hill.

New Haven’s Deputy Administrator for Economic Development Michael Piscitelli told the News that a number of factors make downtown New Haven a strong candidate for a streetcar system including “a high density of people that live and work in town,” as well as New Haven’s strong economic growth position and the fact that it is “one of the very hottest rental residential markets.” The area the streetcar would serve houses three-quarters of New Haven’s jobs and has more than 56,700 residents.

According to the Advisory Report of the City’s Plan Commission — which approved both federal grants in August — one major goal of the program is to promote economic development in New Haven.

Committee chairman Justin Elicker FES ’10 SOM ’10, Ward 10 alderman, told the News that streetcars drive development because the route never changes, encouraging investment around the route in a way that additional bus routes, which are subject to change, may not.

Yale currently runs a shuttle between the train station and campus, and members of the committee questioned the impact of an overlap between the shuttle and streetcar routes.

When asked if she would be inclined to use the streetcar, Jeannette Penniman ’12 said, “In the same way I don’t use the Yale shuttles, I probably wouldn’t use a streetcar. But I think having another form of transportation is important.”

An assessment of the New Haven streetcar plan prepared by TranSystems and Stone Consulting & Design noted that Portland, Ore., Tampa, Fla., and Little Rock, Ark., have all successfully introduced modern streetcar systems.

The grant, if received by New Haven, would be matched by $200,000 in city and/or state funds.

The second grant, worth $670,000 and provided by the U.S. Department of Transportation’s Transportation, Community and System Preservation Program (TCSP), will be used to create and install a new wayfinding sign system in New Haven. The city government has worked closely with the Town Green Special Services District on the design and funding of the project.

The City Plan Commission Advisory Report said that the signs will ideally be installed by the beginning of 2013 and will reduce traffic in downtown New Haven and encourage people to walk and bicycle by providing clearer routes.

Plans for the new street signs will benefit motorists, cyclists and pedestrians. The signs would include large text directing motorists to important routes and points of interest, as well as information for pedestrians including maps and walking routes and distances. The signs have not been replaced in more than 20 years.

The city will match this second grant with an additional $180,000.