How will WMATA avoid crisis and cover costs for the next couple years? - TransitCenter
Governance
February 16, 2024
How will WMATA avoid crisis and cover costs for the next couple years?
Back to
the Blog

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 two 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. You can find part one here.

With just one month until Virginia’s legislature closes up shop for the year and Maryland’s body only active into April, time is ticking down until Metro riders could face a potentially eye-watering 67% cut in transit service. DC’s budget year doesn’t begin until October, meaning the District will have to amend its current budget to pay its portion in time for WMATA’s new fiscal year starting in July.

If the mechanics of coordinating a Metro rescue across three jurisdictions sound complicated, imagine the complex politics, especially in an era where DC, Maryland, and Virginia seem set on competing to see who can take home which large federal employers and regional entertainment amenities. Although few leaders across the region appear focused on fixing the long-running, structural issues inherent to WMATA’s financial distress, the prospect of a transit death spiral has turned officials’ attention to the question of how to fill the transit agency’s glaring budget gap for at least the next few years, with growing calls for additional federal support.

Maryland’s math

With Maryland’s Transportation Trust Fund facing a more than $3 billion deficit over its next six-year planning period, it wasn’t always clear that the Old Line State would be able to come to WMATA’s rescue. However, Maryland Department of Transportation officials are proposing a $150 million increase to WMATA’s operating subsidy for FY2025, which begins this July, and FY2026, with that amount of extra aid rising to $250 million through FY2029. That sum would come on top of the three percent annual subsidy increases allowed under the 2018 three-jurisdiction capital funding deal.

“If other jurisdictions provide comparable funding under their relative subsidy levels, that allows us to have a reasonable conversation about fare policies, service plans, and the overall fiscal management strategy for WMATA,” said Drew Morrison, the acting director of MDOT’s Washington Area Transit Office.

Unlike in Virginia, where the jurisdictions with Metro stops contribute half of the commonwealth’s contribution to WMATA each year, Maryland has long footed the bill fully at the state level. One could argue that Gov. Wes Moore’s administration was uniquely prepared to respond to WMATA’s current fiscal woes because of MDOT’s direct oversight of the Maryland Transit Administration (MTA) and the agency’s efforts to protect Baltimore’s core transit service against similar headwinds.

“Lots of the things that have caused the fiscal cliff at WMATA are things that we incrementally over time dealt with in the Maryland budget process,” Morrison explained. “Running out of COVID dollars, lower ridership revenue, adding a whole bunch of positions to fill the bus operator shortage — we did those things along the way under the line at MTA, whereas WMATA sticks out in the way it appears within our budget process.”

The commonwealth’s contribution

To account for Virginia’s slightly lower usage of Metro, electeds on the southern side of the Potomac need to pull together $130 million. Both the state government and the half dozen localities with Metro stations will have to contribute $65 million each.

Local jurisdictions could create a regional sales tax or temporary occupancy tax to shift some of the burden off of residents and toward NoVA’s visitors and business travelers. As a Dillon Rule state, it would require approval by the General Assembly, but no such bill has been introduced this year. In the meantime, Alexandria, Arlington, Falls Church, Fairfax County, Fairfax City, and Loudoun will have to figure out where to find the needed $65 million in Metro funding on their own.

How the commonwealth comes up with its $65 million match will be part of a broader budget brawl that could drag on for many months and include contentious topics such as toll relief in Hampton Roads, a long-awaited legal weed market, school funding, and a regressive tax plan. The other hot issue at play is the proposed Potomac Yard arena, which Gov. Glenn Youngkin recently declared “disconnected” from the issue of further Metro funding after a short Yellow Line ride with WMATA leadership.

Northern Virginia legislators’ decision to carry sponsoring legislation for the arena and Youngkin’s subsequent public commitment to Metro funding had hinted at a quid pro quo deal. But that’s not how Scott Surovell, the majority leader of the Virginia Senate and the state’s second most powerful lawmaker, sees it.

“I don’t think Youngkin is hanging [WMATA funding] on the arena deal,” he said. “If he is, that is news to me because Metro needs to be solvent and funded whether there is an arena or not. All of the construction cranes in Northern Virginia are around Metro stations. Nobody is building anywhere else, and I assume it’s the same in DC and Maryland.”

So far, discussions towards a long-term fix for WMATA’s structural budget crisis have yet to extend beyond a handful of senior NoVA lawmakers. However, a demographics report out last week that showed Fairfax County losing population fast has certainly focused minds on the need to keep NoVA as attractive as possible.

 

A map of Virginia’s population change. (University of Virginia’s Weldon Cooper Center for Public Service, used with permission).

“Transit-oriented development is where all of the workers of the future want to live, so if we are going to continue to have an area that is attractive to America’s top talent, then we have to have a functioning transit system,” Surovell said. “I want to get this over with so we can focus on increasing core capacity.”

The District’s decision

Earlier this month, Mayor Muriel Bowser, DC Council Chairman Phil Mendelson, and Councilmember Charles Allen issued a joint letter outlining the District’s decision to “provide up to $200 million on top of [the city’s] FY24 operating subsidy” to help close the operating deficit for FY 2025 starting this summer. To better explain the jurisdiction’s stance, the letter laid out six points in a framework to restore WMATA to financial stability.

The first and last points in the letter underscore the fact that the District is offering Metro a one-time subsidy to avoid crisis levels of transit service cuts, but that the full DC region must come to the negotiating table this spring to tackle WMATA’s “seriously flawed” funding formula. The other points in the framework demand Metro not reduce service within DC, slow the growth of its personnel costs, not reallocate more than half of its preventative maintenance dollars to operating expenses, and freeze all new capital projects that do not go toward the system’s state of good repair.

The District is, unfortunately, not flush with funds. The whole region is being hit hard by dramatic office building devaluations due to the popularity of remote work and its impacts on property assessments. With one in four residents working from home, DC’s office-heavy downtown may never be the same.

“The future of downtown is not a commuter rail,” Allen said. “The future of downtown is a thriving neighborhood where people live, work, and play, and to do that, you’ve got to have robust transit that moves you around just the way transit is moving people around in other parts of our city.”

Land use changes take time, especially when it comes to the particularly tricky business of office to residential conversions. That means downtown DC will require years to make the switch from a neighborhood that once relied on nine-to-five commuters to a vibrant area with full-time residents — years it will only have if the region can find a fix for WMATA’s long-term funding crisis.

“My fear is that too many politicians like to find a short-term solution and pat themselves on the back and not fix the long-term solution,” said Allen.

Agency austerity

As the three jurisdictions consider how to close WMATA’s funding gap, the agency’s leadership has been hard at work cutting what costs it can without impacting riders. With an emphasis on modernizing and digitizing operations, general manager Randy Clarke has scraped together $50 million in recurring savings by consolidating Metro’s call centers from four to just one, reducing the non-revenue vehicle fleet, de-siloing operations, centralizing software and procurement, and cutting back on consultants. Finding $95 million in one-time savings the agency could carry over from FY2024 was also a minor miracle.

After the agency estimated that it lost $40 million per year to fare evasion, it’s installing new higher faregates at all planned stations by late summer or early fall. Early reports on their efficacy showed a tenfold drop in riders avoiding payment at some stations, allowing WMATA to effectively end fare evasion across its rail system (as well as the problematic rhetoric it entailed).

A wage and salary freeze for all non-represented employees and Metro employees with the two largest unions will save the agency $38 million. An 11.5% increase in full-time employee expenditures last year alone alarmed some Metro watchers, but part of those higher costs came from an effort to bring multi-year projects in-house instead of bidding them out to contractors who cost more over the long run. However, asking WMATA employees to sacrifice future salary increases isn’t sustainable.

“Look at today’s job report,” said Clarke. “The economy is doing very well, and it is very hard to hire. This is a very competitive region, so when we say ‘no raises’ we just have to be honest that this does hurt recruitment and retainment, but this is something we feel obligated to do.”

Clarke believes the WMATA Compact of 1966 (the governing document between Virginia, Maryland, DC, and the federal government) will ultimately have to be renegotiated over the next two years to avoid a continued crisis. But in the short-term, he is not opposed to some reasonable right-sizing of service and fares.

“We are also looking at some targeted service cuts, and I think it’s pretty clear that we need a fare increase. We’re trying to figure out how to get a fare increase that is more reasonable and fair because too high, we are actually going to hurt people and drive down ridership, and too low, people think the customers need to keep up with inflationary pressure, which I think there is a lot of fairness to that.”

Federal failure

With all three jurisdictions and Metro leadership trying to pull their weight, the elephant in the region is the one WMATA compact member that has made no recent effort to make sure public transportation in the nation’s capital remains solvent: the federal government.

Before the pandemic, the federal government contributed $200 million a year by paying for its employees’ fares, but last year that figure was just one fourth of what it amounted to five years ago. With two out of eight WMATA board seats (disclaimer: Tracy Hadden Loh, one of DC’s WMATA board members, is also chair of the board of Greater Greater Washington), the federal government has the opportunity to be an equal player in the agency’s governance. But many observers don’t believe it pays its fair share for WMATA operations.

“Prepandemic federal workers comprised 40% of weekday rail ridership; today it’s just 14%,” said Laura Miller Brooks, director of transportation and infrastructure for Federal City Council, a DC think tank. “We have inherited this system from the feds, and we are losing leverage with them every day that we don’t talk about how much Metro is going to cost the region going forward.”

If Metrorail ridership remains at its current low levels, Brooks worries the operating dollars deficit could grow to $1.5 billion by FY2029.

The long and short

WMATA was built on the false premise that fares could cover costs (and with no mention of bus or paratransit service). It owns only a small proportion of developable land around its stations, so has limited options for using land to raise revenue, plus no ability to levy taxes to support its service. Solutions to the immediate financial gap come down to reducing costs and bringing in more funding from compact members and riders, with more complex and creative revenue-raisers part of the longer-term conversation.

All three jurisdictions, as well as Metro’s leadership, agree on the need for the region to hash out a long-term fix for WMATA’s growing operating dollars deficit, and the convening role that the Metropolitan Washington Council of Governments could play in driving partners toward a resolution. But no such process seems to be underway yet.

“There is a fatigue right now of why does this keep happening,” Brooks said. “The only world in which the business community sleeps well at night is that all three jurisdictions and legislatures put in writing that they will work together and fix the structure over the next few years.”

Never miss a post! Sign up for our newsletter, the Dispatch:

* indicates required
Back to
the Blog