SunRail Financial Realities

May 14, 2010

Commissioner Dillaha continually blusters about financial uncertainties involved in the city’s commuter rail agreement with Orange County. Having 35 years of financial management, executive leadership and investment management experience I share Ms. Dillaha’s fiscal conservatism. However, with regard to her dismissal of commuter rail, Ms. Dillaha repeatedly and consistently overstates the risks without addressing the opportunities and exaggerates the costs without addressing the benefits.

The most meaningful risks and costs of SunRail for Winter Park arise from not participating.

The following analysis relies in part on SunRail operating cost estimates from the Florida Department of Transportation (FDOT) provided in 2007. FDOT is preparing updated estimates expected to be available shortly. I will update this presentation based on the new estimates when they are available.

Financial Costs

• Capital costs of our Winter Park station are to be paid by State and Federal dollars.
• Operating and maintenance costs associated with Winter Park’s SunRail station are to be paid by FDOT during the first seven years of fare paying service.
• Winter Park’s financial exposure is protected by the “opt out” right in the existing commuter rail agreement. The “opt out” creates the opportunity to renegotiate the entire agreement or walk away from SunRail after seven years of operating experience if a funding source is not in place to defray operating and maintenance costs.

Financial Benefits

• The existence of our station will accelerate Winter Park commercial redevelopment, generating new revenues from non-residential sources to support public safety, parks, roads, bike paths… our quality of life.
• The existence of our station will increase taxable values of existing downtown properties as a result of increased economic activity related to use of the station.
• The existence of our station will increase home values relative to residential areas without a SunRail station, solidifying Winter Park’s standing as the most desirable residential community in central Florida for the long term.

Alternatives

• SunRail is a reality. Winter Park’s only alternatives are to either participate, or face the full impact of the trains passing through town without ever stopping, and never realize the benefits of participating.

While Winter Park’s financial exposure is protected by the existing “opt out” right after seven years of fare paying experience, we should look at what the operating and maintenance costs might be at that time. While there can be no certainty in the absence of experience (which is why Winter Park has the “opt out” right), the FDOT estimates give us the most educated framework available.

Using 2007 FDOT estimates, Winter Park’s annual SunRail costs after seven years of fare paying service would be about $350,000 without originally projected bonding costs, and $700,000 including such bonding costs. This is net of the 30% to be paid by Orange County under the existing agreement. The Commuter Rail Commission Technical Advisory Committee has indicated that FDOT is now committing to pay the full cost of the CSX transaction that enables SunRail. This action would remove the bonding costs, eliminating approximately half of the costs Winter Park may absorb in the absence of opting out or renegotiating in year seven. (James Harrison, Director of Growth Management for Orange County, recently confirmed the expected $350,000 annual expense level and the removal of the bonding costs.)

Winter Park has 28,000 residents, $4.5 billion in property valuation and a $45 million annual General Fund budget.

• It would take a onetime increase of $85 million in new property valuation at today’s millage rate to contribute $350,000 to our annual revenues, $160 million in new property valuation at today’s millage rate to contribute $700,000 to our annual revenues.
• The estimated value of new construction in Winter Park averaged $125 million over each of the past five years.
• Over $400 million dollars in new taxable value has been created in our CRA (downtown redevelopment district) alone during the past 16 years.

If the “opt out” right is not exercised or used to renegotiate AT OUR OPTION, projected annual SunRail costs can be covered in full by incremental commercial redevelopment (which the station’s existence nurtures and will accelerate), making it unlikely residents will have to contribute a dime (even though we will benefit). Note again that FDOT pays operating costs of SunRail for the first seven years after fare paying service begins which takes us at least to 2020. Also note that expiration of the CRA in 2027 would contribute about $1.5 million in new annual revenues to the General Fund based on current CRA valuations (which will be higher in 2027). Higher ad valorem revenues (property taxes), while not directly appropriated to support SunRail costs, are fungible with non-ad valorem revenues appropriated in support of such costs. That is, it doesn’t matter which bucket the money comes from.

Conclusions:

• Winter Park’s financial exposure is protected by the existing “opt out” right.

• The first seven years of experience will demonstrate both the actual costs and actual benefits of Winter Park’s participation in the SunRail system. We will be able to judge how to manage the “opt out” based on these realities.

• SunRail gives Winter Park a competitive advantage that will nurture and accelerate commercial redevelopment to help finance our quality of life and lessen upward pressure on residential taxes while also assuring our home values remain competitive for the long term.

• The absence of a SunRail station exposes Winter Park to the full impact of the commuter rail system without any possible benefits as the trains pass through town and never stop.

• The failure of Winter Park to embrace the SunRail opportunity now will prove a strategic blunder of unparalleled magnitude down the road.

I urge you to contact our city commission members with this message:

We call for an end to the obstruction and a beginning to the cooperation needed to make our SunRail station a reality, and a social and financial success for Winter Park.

Winter Park Mayor and Commissioners can be reached at:

Mayor Ken Bradley – KBradley@cityofwinterpark.org
Commissioner Carolyn Cooper – CCooper@cityofwinterpark.org
Commissioner Phil Anderson – PAnderson@cityofwinterpark.org
Commissioner Tom McMacken – TMcMacken@cityofwinterpark.org
Commissioner Beth Dillaha – BDillaha@cityofwinterpark.org

Pete Weldon
700 Via Lombardy
Winter Park, FL 32789