Money budgeted for repaving potholes on one of the city’s most pockmarked streets may be shifted to a controversial streetcar project.

Late last month, City Commissioner Sam Adams wrote to business owners on Northwest 23rd Avenue that long-planned reconstruction of their street between Burnside and Lovejoy streets would not happen.

“It was not an easy decision to cancel the project,” wrote Adams, who’s running for mayor. “Maintaining city streets is one of my priorities, but I could not proceed with the project knowing that it would have an adverse impact on our local businesses.”

Adams says merchants along the popular shopping thoroughfare who are nervous about economic conditions lobbied him to delay the $3.2 million project, which had increased in scope as city engineers discovered that fragile water and sewer lines might double the time needed for the project from six months to a year.

“We agree that the patch option is the best one right now,” wrote Gwenn Baldwin of the Nob Hill Neighborhood Association in an email to Adams. The Northwest District Association also endorsed Adams’ decision.

But one immediate consequence of Adams’ decision is that his bureau, the cash-strapped Portland Office of Transportation, must write a hefty refund check to the Federal Highway Administration.

That’s because the feds contributed $1.64 million to the 23rd Avenue repaving project. And transportation office project manager Greg Jones says the agency has already spent $400,000 of the federal money on design work for the repaving.

“It’s as if $400,000 doesn’t mean anything anymore,” says Jason Williams, director of the Taxpayer Association of Oregon. “This council does not value people who drive to work, or on a balanced budget.”

So where’s the rest of the money going? Maybe to a new streetcar line.

Adams has spent much of the past six months trying to convince Portlanders that the Transportation Office lacks the money to tackle the city’s 422-mile backlog of deferred street maintenance.

As a solution, and at considerable political risk, he has promoted a new $464 million, 15-year tax, which, after extensive wrangling with critics, is now tentatively scheduled to appear on the November ballot (see WWire.com for more).

But rather than shifting the remaining federal money to another paving project, the Transportation Office wants Metro, the regional government agency that serves as a conduit for federal transportation dollars, to green-light putting it toward a new streetcar on West Burnside and Northwest Couch streets.

That project, pushed strongly by Adams, is part of a realignment of Burnside and Couch into one-way streets east of Northwest 14th Avenue. After considerable opposition, Adams won support for the so-called Burnside-Couch couplet last year, in part by proposing a new streetcar line there.

Finding the money for the project is another story.

Project manager Jones says his agency needs about $1 million that it doesn’t currently have to do a study called an “alternatives analysis” that could pave the way for federal funding of the new streetcar line.

Andy Cotugno, Metro’s transportation manager, says the Transportation Office could legally redirect federal funds to the Burnside-Couch project for a feasibility study of a new streetcar, although he noted that project has not yet qualified for more significant funding under the “Small Starts” program.

Adams denies that the need to find funding for Burnside-Couch played any role in his canceling the 23rd Avenue project.

“It’s a reality of trying to maintain a transportation system that you have to minimize disruptions and not put people out of business,” Adams says. “I’ve made a commitment that [23rd Avenue] will get done. It just may take another three to five years.”