It's not necessarily that it was broken and then fixed, in small rural towns it is common to set the traffic signal to blink yellow when there is little traffic. Usually, they are in normal operation during the day and blinking yellow at night. The point in the film was not fixing broken things but restoring the town to how it was in it's heyday when there was traffic. In Cars Land there are mostly people walking around, not cars driving around, so no need for a traffic signal.
Originally Posted by peagreen
But... the light was never broken in the first place...
Why is everyone else saying the light was broken? This is how small town Main Street traffic signals work.
At night, the light goes to blinking yellow because there is very little cross traffic. Most is through traffic and blinking yellow means "proceed slowly".