By Wyatt Gordon
Note: A version of this article was originally published by Greater Greater Washington, a nonprofit dedicated to advancing racial, economic, and environmental justice in land use, transportation, and housing throughout the Greater Washington region. This is part one of a series on the Washington Metropolitan Area Transit Authority (WMATA)’s fiscal cliff, which refers to the drastic shortage of funding to cover the costs of the region’s transit system from mid-2024 onwards.
Last month, while most Americans were decking the halls and stuffing their stockings, the Washington Metropolitan Area Transit Authority (WMATA) was engaging in its own time-honored tradition of releasing a doomsday budget. The Metro faces a $750 million funding gap for fiscal year 2025, meaning that crippling cuts could force the agency to slash service across the Greater Washington region as early as July — just six months from now.
Boasting five of the nation’s top ten richest counties, it’s not that the Washington region doesn’t have the money to support a world-class transit system. The origins of WMATA’s current crisis go far beyond the pandemic to the creation of the Metro nearly half a century ago, and if politicians and the public want to stave off disaster — or better yet, finally offer the agency sound financial footing upon which to operate and grow – then they must understand how we got here.
The original hole that hasn’t been fixed
WMATA was established in 1976 as part of a second wave of great American public transit systems alongside the likes of BART in San Francisco and MARTA in Atlanta, but unlike any of its peers, Metro receives zero dedicated operating dollars.
The absence of dedicated operating funds form the crux of WMATA’s current financial viability challenge. Without a funding mechanism like a regional sales tax, or road pricing as applied in other regional transit systems like London’s and soon New York’s, Metro has to scramble every year to ensure it’s got the dollars to fund salaries and other non-capital costs.
While General Manager Randy Clarke’s December delivery of a doomsday budget may seem like a scare tactic designed to jolt DC, Maryland, and Virginia into coughing up more cash for Metro, by the end of each calendar year, WMATA is actually legally obligated to release a balanced budget, outlining what cuts would be required should the agency not be fully funded for its coming fiscal year.
While the District and Maryland more-or-less cut Metro a check each year, the commonwealth uses a much more complicated system to scrape together its contribution from across state and local funding sources. Virginia’s Metro money comes from three entities: the state Department of Rail and Public Transportation (DRPT), the six local jurisdictions with Metrorail stations, and the Northern Virginia Transportation Commission (NVTC).
DRPT’s dollars are the result of a mandated match under the Passenger Rail Investment and Improvement Act of 2008 and a mix of a regional gas tax, a regional grantor’s tax, a regional transient occupancy tax, a recordation tax, and a statewide car rental tax which are all funneled into the commonwealth’s WMATA Capital Fund. The six local jurisdictions, Alexandria, Arlington, Falls Church, Fairfax City, Fairfax County, and Loudon, use general funds, bonds (only for capital projects), and money from the Northern Virginia Transportation Authority (NVTA) to pay their part. NVTC’s share comes from a regional gas tax and some state aid distributed via a subsidy allocation model.
Although the Metro was explicitly built to bring suburban commuters downtown to work for the federal government, historically, the feds’ only contribution to the system’s operating costs has been to pay its workers’ fares via employee transit benefits. That worked well enough until the COVID-19 pandemic kept the federal workforce at home for years.
Death spiral of doom
By the end of 2023, Metrorail’s average daily ridership was just 56% of what it was in 2019, generating nearly $100 million less in fares today than in 2019. For the current fiscal year, fares and other Metro-generated revenue such as parking and advertising comprise just 22% of WMATA’s budget. Increased off-peak service and streamlined fares have recently helped weekend ridership bounce back to 90% of pre-pandemic levels, but the classic commute is still only at 55% of what it once was.
With one in four residents of the DMV working from home, the capital region has the second highest share of workers who no longer commute, a full 10 percentage points above the national average. However, even if President Joe Biden and the rest of the region’s large employers were to require the full return of their workforce, as Virginia Governor Glenn Youngkin urged in a strongly worded letter last month, more than 75% of WMATA’s future annual deficits would still remain. Return-to-work — especially if we only focus on the feds — will not fix the majority of WMATA’s budgetary woes.
Federal pandemic relief dollars filled WMATA’s budget hole for the last few fiscal years; however, those funds have finally been exhausted, leaving the Metro with a $750 million budget gap for FY 2025 to begin this July. Although general manager Randy Clarke recently identified $100 million in cost savings and preventative maintenance dollars that could be flexed to operating funding, that still leaves a deficit of $650 million. If the three jurisdictions cannot come together to find the funding, the cuts could be catastrophic.
As the majority of Metro’s operating dollars go to the staff that keeps the system running, the only way to cut costs is to cut service — drastically. Since any reduction in service would result in a further loss of riders frustrated by less frequent trains or their bus route no longer existing, WMATA would actually have to cut $947 million from their budget in order to compensate for the estimated further $197 million in ridership revenues lost due to the cuts. That means the service cuts required to get to the needed 37% reduction in costs would translate to a breathtaking 67% slashing of service.
Starting in July, the number of Metrorail trips where a train comes every six minutes or sooner would drop from 81% to just 10%. All Metro stations would close at 10:00 pm seven days a week. Sixty-seven of WMATA’s 135 Metrobus routes would be cut completely, while an additional 41 would face less frequent service. MetroAccess, a program serving the region’s aging and disabled populations, would only operate in areas as required by federal law. Lastly, all fares would rise by 20%, with a standard Metrorail fare from the suburbs into DC costing as much as $7.20.
WMATA would even have to close its 10 stations with the lowest ridership, which, based on current ridership data, presumably includes five on the $6.8 billion Silver Line in Virginia that was just completed a little over a year ago, as well as Potomac Yard, Metro’s newest infill station that Gov. Youngkin hopes will house a brand new $2 billion sports arena.
“It’s hard to even imagine the scale of the economic and social damage if these cuts go through,” said WMATA board member Dr. Tracy Hadden Loh (Disclosure: Dr. Loh also serves as the chair of GGWash’s board). “The DC region is at a precipice where we could emerge stronger than ever with an economy that looks different but has exciting new possibilities, or we could choose stagnation and decline. If that happens, it won’t just be because the money isn’t there. It will be a policy choice.”
Save the system…again
The last time WMATA found itself in dire fiscal straits was half a decade ago, in 2018. In response, DC, Maryland, and Virginia struck a capital funding deal that, for the first time ever, offered Metro dedicated capital dollars. Those dollars can pay for new trains, station improvements, and anything physical WMATA needs unlike operating dollars which only cover the salaries and specifically service related costs.
In a series of bills that had to clear the DC Council as well as the General Assemblies of both Maryland and Virginia, each of the three jurisdictions agreed to contribute $167 million to WMATA annually. In exchange for a total of $500 million in new dedicated capital funding, the agency agreed to implement a 3% cap on the growth of operating assistance payments from the three jurisdictions.
“At the time, it seemed like a good governance tool to control cost escalations, but because of the 3% cap not being indexed to inflation, we are now dealing with a WMATA that has to present a balanced budget next year in the face of the disappearance of federal relief funds and the new reality of higher costs of construction and operations,” said John Hillegass of the Greater Washington Partnership (GWP), a business community alliance (Disclosure: GWP is providing support to GGWash enable this series of articles, described in greater detail below).
Although the half billion in dedicated capital dollars and federal relief funds allowed WMATA to reduce its state of good repair backlog from over $5 billion in 2018 to just a little over $1 billion today, Metro’s capital expenditures increased by roughly half over the same period, to say nothing of the agency’s operating expenses.
This year DC is set to contribute $448 million for capital and operating expenses to WMATA while Maryland pays the most with a $474 million contribution, and Virginia puts in $330 million. To close the current $750 million budget hole in a proportional manner, DC would need to increase its contribution by $275 million, Maryland would have to up its commitment by $209 million, and Virginia would need to find an additional $180 million for WMATA.
With DC down on itself and wracked by infighting between Mayor Muriel Bowser and its council, Maryland’s Department of Transportation hamstrung by a $3.3 billion budget shortfall, and Virginia’s potential to pay into Metro increasingly contingent on a controversial sports arena deal, the timing could not be worse to find more funding than ever to help WMATA avert its impending fiscal cliff – let alone to permanently resolve the transit agency’s structural funding issues.
“We’ve never really figured out how to pay for WMATA as a region and create the funding stability that a world-class transit agency needs,” said Hillegass.