Project NPV, Positive Externalities, Social Cost-Benefit Analysis-The Kansas City Light Rail Project

Abstract

Using best estimates of construction costs, operating expenses, and federal funding, the authors estimates the net present value (NPV) of the project to be negative $343 million. From a standard NPV perspective the Kansas City light rail transit (LRT) system is unlikely to break even. However, if the negative externalities of auto travel and the positive externalities associated with light rail are properly accounted for in a comprehensive social cost-benefit framework, investment in the Kansas City LRT system becomes an increasingly feasible option.