U.S. Transportation Secretary Ray LaHood announced an agreement to provide $942.2 million from the Federal Transit Administration (FTA) to extend San Francisco’s Third Street light rail system through the city’s busy Chinatown neighborhood, bringing light rail back to the heavily transit-dependent Third Street corridor for the first time in 50 years.

The new T-Third Light Rail extension, part of the San Francisco Municipal Transportation Agency’s (MTA) Central Subway project, will run from the downtown business district north to Chinatown along one of the city’s most heavily-traveled corridors. Once completed, it will improve transit options between the Financial District and Union Square, while connecting Chinatown with existing Bay Area Rapid Transit District (BART) rail service, Caltrain and other transportation services.

The project construction is expected to create about 1,000 jobs by the end of this year, with many more jobs to follow as tunnel construction gets under way in 2013, according to the MTA.

Federal funding for the project is provided to the San Francisco MTA through FTA’s Capital Investment Program (New Starts). The $1.6 billion project will extend Muni light rail service by 1.7 miles of the T-Third line from the 4th Street Caltrain Station to Chinatown and includes construction of four new stations, three of them underground.

The first phase of the T-Third Street light rail line went into service in 2007. Once the extension opens, the projected ridership along the entire 6.8-mile T-Third line is estimated to be 43,700 daily boardings per weekday, the highest ridership in the system.