Metro faces $750 million budget gap, could lead to dramatic service cuts The transit agency will need to build a coalition of local elected officials and more to advocate for funding and avoid dire cuts.
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Metro faces $750 million budget gap, could lead to dramatic service cuts

Metro faces $750 million budget gap, could lead to dramatic service cuts

Metro is facing a historic $750 million budget gap, which left unfilled would mean drastic service cuts. Tyrone Turner/DCist hide caption

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Tyrone Turner/DCist

It's been a long few years for Metro. A pandemic that decimated ridership. A derailment that sidelined most of its fleet. But more recently, there have been signs of hope. Sixty percent more trains are running compared to this time last year. And, the transit agency opened seven new stations in the past year.

But now WMATA officials face a structural financial problem that has been brewing since the transit agency opened, but exacerbated by the pandemic and rising labor costs.

Rail ridership is still down 50% since the beginning of the pandemic, as many of the region's white-collar workers aren't commuting nearly as often as they used to. This is leading to a fare shortfall. Meanwhile, Metro's biggest labor contract includes raises tied to inflation, costing the transit agency 20% more in payroll just over the past two years.

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Metro can't run at a deficit because of its statutes. It doesn't have a source of dedicated funding to run trains and buses, relying on each local jurisdiction to contribute, instead of a direct source of revenue like a sales tax or property tax. WMATA is the only transit agency in a market of its size that doesn't have at least some form of dedicated funding for operations. It does get $500 million annually for dedicated capital funding.

Costs are rising faster than revenues. It's an industry-wide issue.

"Our region has just over a year to resolve the 50-year-long conversation about how to sustainably fund Metro so it remains the backbone of our economic prosperity for decades to come," Metro wrote in its recent strategic plan.

Metro General Manager Randy Clarke says things have been getting better in the past year: there's more service, better reliability, more stations opening, more ridership, and a customer satisfaction score of 86%. But Metro can't overcome these fiscal headwinds on its own.

"We're not our own taxing authority. We don't have the ability to make money (outside of fares)," Clarke said. "This is going to be a regional issue and it needs a regional solution."

"(Metro) is just too important to the region, and too many people worked so hard to build this incredible regional asset. I find it hard to believe that anyone is going to be supportive of these types of cuts. They devastate the region."

The rider impacts

Tuesday, Metro painted a dire picture of what would happen if the problem festers: service cuts that would "devastate the region."

These cuts would include eliminating two-thirds of bus and rail service resulting in worse service quality and degraded safety and accessibility.

Trains currently run about every 6-12 minutes across the system. The heaviest cuts would have trains arrive every 20 to 30 minutes and shut down at 9:30 p.m., meaning no service for nightlife or night games for Caps, Wizards, and the Nats. Buses would run every 30 minutes.

Trains and buses would be overcrowded and you might not even be able to board at peak times. MetroAccess handivan riders would see less service and could go to fewer places.

Clarke highlighted a potential situation at the airport where trains would only arrive every 20-30 minutes, meaning more people opting to take Uber or Lyft, further clogging the George Washington Parkway.

The system capacity would serve only 300,000 on rail and 200,000 on the bus each day, which is below current ridership levels.

Metro says the demise of transit would mean more congestion on roads, more pollution, and reduced economic competitiveness and quality of life.

Escalators and elevators would break more often as maintenance decreases.

Reducing service quality means fewer riders, which means less revenue resulting in more cuts down the road. This version of Metro's future is known as a transit death spiral.

The ripples could be felt as soon as July 2024 when Metro's next fiscal year kicks in.

But Metro says the region can't let it fail. Nearly 70% of jobs and 60% of the region's population live within half a mile of rail stations and bus stops.

The half-mile radius around Metro stations makes up just 3% of the region's land area but accounts for 30% of property values, 65% of new developments, and half of all new apartments in the region.

How did we get there?

If you're a regular follower of Metro news, you might be asking yourself, "Wait a minute, don't we do this budget crisis song and dance every year?"

The short answer is: yes.

During the pandemic, Metro looked at service cuts including no weekend train service, shuttering 19 stations, and trains arriving every 30 minutes.

And every year changes are made to meet that budget gap – increased fares, reduced service, freezing hiring, moving maintenance dollars to operations, and finding cost savings elsewhere. But the difference between this year and previous budget gaps, like in 2018: the problem is too structural and too big to handle on its own, Metro says.

Fares would have to rise to between $20 to $30 per ride to fix the problem. Cutting service does little when so much of the cost of running service is a fixed cost of the support behind the scenes: station managers, a round-the-clock control center, maintenance workers, police, custodians, and more. About 80% of Metro's rail budget represents that fixed cost. Officials are reluctant to cut those positions for safety and quality.

This time, the size of the budget shortfall, at $750 million, is fundamentally different from prior years having gaps ranging from $280 million to $500 million. Record inflation, labor cost increases, COVID changing ridership and work habits, and federal pandemic relief running out combine to drive Metro's existential funding problems this time.

Early in the pandemic, Metro's board decided to give all the local jurisdictions from the big counties like Montgomery to the small cities like Falls Church some relief when they were facing financial problems. That courtesy has come back to bite Metro to the tune of nearly $200 million.

But a large budget gap was always looming for Metro, even back in 1976 when the system launched. A report said the financial model "potentially poses one of the gravest fiscal and political crises ever confronted by Washington."

"It's going to be a slog politically," Metro's board chair Paul Smedberg told the Northern Virginia Transit Commission last month. "It has to be the entire community bringing this issue forward, it can't be just Metro."

Metro has been trying to do its part, cutting nearly a billion from its budget over the last three years by reducing its share of healthcare costs, maximizing its land and entering into development deals, consolidating offices, eliminating positions, and more. It's also tried to address fare evasion concerns by increasing police patrols and making faregates higher.

Riders might have a healthy dose of skepticism as Metro has opened new stations, moved into a renovated headquarters, and is buying new trains.

Metro says the operating budget and capital budget are from separate pots of money.

Potential solutions

New York City's MTA averted its fiscal cliff in April by increasing its payroll tax, which is expected to bring in a billion dollars annually, and a slate of other funds. In California, state funds are in play to keep San Francisco's BART running.

The Capital Region is a little more complicated with four jurisdictions – Virginia, Maryland, D.C., and the federal government – each having input over how Metro manages its budget.

The transit agency is looking for a predictable, sustainable, and dedicated funding source. But who will provide it?

Metro officials think the process could look somewhat similar to the 2018 deal to get dedicated capital funding. The Metropolitan Washington Council of Governments, a panel of elected officials from around the region, helped shepherd that discussion when Metro was reeling from years of delayed maintenance because there wasn't any money to do it.

Each state legislature passed a bill contributing $150 million annually for maintenance, new trains, and other capital needs. But the deal also capped jurisdictional subsidies to 3% increases each year, which is exacerbating today's problems.

But in 2023, there's a concern over who should go first.

Metro shouldn't be prescribing the solution, Metro finance chair Matt Letourneau says.

It's early, but so far no one else is putting anything on the table yet, either.

Sen. Tim Kaine of Virginia says the federal government will be "a key partner" in the solution but was not yet sure how "the pie chart gets divided."

"We have to understand what the new reality is and then continue to be partners going forward," Kaine said in May. "So it's going to be local officials, state officials, federal officials, Metro itself, and its riders.

"We'll figure it out because, again, the region can't work without a healthy Metro system."

Maryland Transportation Secretary and former WMATA General Manager Paul Wiedefeld said he has to think of the problem with his state hat on.

"The money that comes to Metro comes out of the trust fund and the trust fund has lots of demands on it, including a Baltimore system, which basically is facing the same drop in federal dollars," he said. "We also fund the locally operated transit systems, which are also facing the same drop of federal dollars, so we have to take that into consideration."

Maryland's legislature has established a commission to look at the transportation trust fund to look at how to deal with the financial situation, including the declining gas tax revenues due to more efficient vehicles.

"I think we also have to recognize the market's changing," Wiedefeld said."And so we need to think through that. What does that mean in terms of what service we provide when provided, how we provide it?"

Local officials like Loudoun County Chair Phyliss Randall and Arlington County Boardmember Libby Garvey have offered suggestions like making the feds pay for it, but Metro Board Chair Paul Smedberg told officials at a May Northern Virginia Transportation Commission meeting that "we are under no illusion of getting federal money."

A sales tax, which has been the panacea for many transit agencies, likely wouldn't fly politically as some jurisdictions, like Northern Virginia, would bring in substantially more money, but not reap more service.

​​Metro officials hope to build a coalition of elected officials and the business community.

The Greater Washington Partnership is made up of a group of big business CEOs. Kathy Hollinger, who is head of the partnership, says Metro's long-term fiscal stability "is essential to the health of our downtown corridors, workers, businesses, and communities."

Hollinger said a comprehensive regional strategy is needed.

"Solving this challenge will take elected officials, business leaders, and WMATA's leadership together at the table to work out a solution," she said. "But we need a plan.

"As always, the Greater Washington Partnership stands ready to work with WMATA and leaders in the region."

What's next?

Metro has been briefing public officials in recent weeks. Its board, which has been working on the issue for months, will hear a formal presentation on Thursday. The public will be invited to information sessions in the coming months.

Metro usually begins its budgeting process in the fall, but it will begin much earlier this year.

Meanwhile, local officials in Maryland, Virginia, D.C. and the federal government will have to decide if and how they want to tackle the problem.

The board will vote on the budget in March and it will go into effect in July 2024.

This story originally appeared on DCist.com.

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