The $25 million, which was applied for in 2010, comes from a $1.5 billion fund under the American Recovery and Reinvestment Act and is known as TIGER (Transportation Investment Generating Economic Recovery) funds.

The funds are to be used for road rehabilitation, landscaping and the purchase of light rail cars for the project.

“Building this light rail system will create jobs for this great American city, and it will stimulate long-term economic growth by attracting investment to downtown Detroit and the New Center area,” LaHood said in prepared remarks.

Proponents of the system plan to break ground in late 2011 once the findings of an environmental impact study are complete this spring.

Both public and private funds would be used to pay for the $450 million trolley-type system, which in total would run 9.3 miles from Hart Plaza to Eight Mile.

The first section of the rail project — running from Hart Plaza to the New Center area at a price of $125 million — is being underwritten by members of M-1 Rail, a consortium of deep-pocket investors including Mike Ilitch, Roger Penske, Peter Karmanos, Dan Gilbert and the Kresge Foundation.

Construction of the section from the New Center area to Eight Mile would be paid for by the City of Detroit and federal funds on a 20/80 percent basis.

The cash-strapped city received a major break last year when U.S. Rep. Carolyn Cheeks-Kilpatrick added an amendment to the 2010 federal transportation bill that would allow Detroit to use the $125 million in private funds as its 20 percent portion of the project.

“That really made the federal government take notice,” said M-1 Rail CEO Matt Cullen, who credited Mayor Dave Bing for his strong leadership for the project.

Tim Hoeffner, administrator of high speed rail for the Michigan Department of Transportation, said the use of private sector money for matching funds is extremely important.

Backers are betting the rail system will create new businesses and residences along the route and also will bring visitors in to enjoy the city’s restaurants, cultural institutions, sports arenas and riverfront.

Detroiter Thomas Page uses mass transit whenever possible and is a big supporter of the light rail project.

“We have to have this if we want to be even a mediocre city, let alone a world class city,” said Page, who lives on Woodward near Grand River.

“Real cities have rail systems. Even people who don’t use them want to live near transportation systems. If we don’t build this now, I don’t see much hope for Detroit or the state of Michigan.”

Hoeffner said the impact study should be submitted by spring, approved sometime this summer and the signing of construction contracts by Sept. 30.

Initial stops on the system include: Michigan State Fairgrounds at Eight Mile, Seven Mile, McNichols, Manchester, Glendale, Calvert and Hazelwood/Holbrook.

More include: Grand Boulevard, Piquette, Warren, Mack, Foxtown and Hart Plaza.