Within three years, city leaders say, the tracks in Elizabeth will be operating and run all the way into Uptown.
LaHood made the announcement of $25 million for the project while promoting the president's jobs bill.
"This rail line becomes and economic engine. It will create jobs all along the line," LaHood said.
The city estimates the number of jobs at 385 just for the first part of what will one day be an 11-mile line.
But not everyone is buying in.
Councilman Andy Dulin is a vocal opponent of the streetcar project because the city had to contribute $12 million of its own.
He's not convinced it will be an economic spark and said any jobs created may just be temporary.
"You have to build what you can build now, and you have to add to it later when you can," Mayor Anthony Foxx said, responding to the criticism.