By Santiago Arango
In May, SunRail, Orlando’s commuter rail system, celebrated its first year of operation and was awarded a $93 million federal grant. Phase II of SunRail’s construction will add four more stations and 17.2 miles of rail into neighboring Osceola County within two years. Orlando is the 4th fastest growing city in the U.S., meaning SunRail has a growing market and an opportunity to sustain itself. Yet concerns remain. SunRail averages 3,700 riders daily, 15% shy of its goal of 4,300. It has accrued a $27.2 million deficit so far. Economists disagree on how best to measure the success of projects like SunRail, but it should be accountable to measurable objectives.
A lackluster first year for SunRail has not shaken the confidence of its supporters. Orlando Mayor Buddy Dyer calls the performance “good for a first year” and expects revenue and ridership to increase. FDOT is likewise optimistic, anticipating savings associated with decreased highway traffic congestion created by public rail transit alternatives.
While privately owned and operated railroad systems, such as All Aboard Florida, must cover its costs with revenues or cease operation, publicly funded transportation projects like SunRail have the luxury of access to state, local, and federal money, and can thus operate as long as public money is available. There is little economic incentive to be profitable with this backing.
But does ridership and profitability tell us everything we need to know about SunRail’s performance? Some economists maintain that positive externalities should be included in analyses of rail transit. Positive externalities are indirect benefits from the production of some good or service, experienced by a third party but not accounted for by producers and consumers. Unlike private benefits (like profits, savings, or utility from consumption), positive externalities benefit people who don’t necessarily buy or use the service (e.g., less secondhand smoke when a smoker decides to quit, less pollution when a driver walks to work, decreased highway congestion resulting from a rail transit as an alternative to automobiles).
A study published by the Victoria Transport Policy Institute (VTPI) suggests ways to measure the positive externalities of public transit. The study quantified their impact by comparing congestion costs in areas with rail systems and those without. On average, commuters in areas with rail systems experienced 46 fewer hours of travel delay annually. VTPI called for other researchers to use a “broader scope of analysis” in assessing rail’s success.
However, SunRail’s financial losses may outweigh the positive externalities associated with it. A study conducted by the Cato Institute questioned economists’ ability to accurately measure positive externalities and other non-monetary benefits. The authors observe that even when accounting for reduced congestion and other positive externalities, few public rail systems are successful. Still, the success of rail service, and public investments in general, ought to be measured by tangible and quantifiable standards that can allow comparisons among projects so that taxpayers can determine the best use of public spending.
After an underwhelming first year of operation, SunRail needs to meet its objectives, whether in terms of profitability and ridership or the positive externality of decreased congestion. Orlando is the 96th most congested city in the world by some measures. Rail transit might provide an alternative to alleviate that congestion although private enterprise has more incentive to do so successfully. Reaching more congested areas where demand for transit alternatives is highest, as it will in Phase III of construction, has the potential to improve SunRail’s performance, but Orlando’s public rail line will need to demonstrate its worthiness to taxpayers by meeting measurable objectives.