LaHood Metro study urges ded­i­cated fund­ing, doesn’t ad­vise how

RE­PORT: $500 MIL­LION MORE A YEAR NEEDED Ways to save in­clude bus fare hikes, re­duced service

The Washington Post Sunday - - METRO - BY ROBERT MC­CART­NEY

The long-awaited re­port on Metro by for­mer U.S. trans­porta­tion sec­re­tary Ray LaHood urges the re­gion’s three ju­ris­dic­tions and the fed­eral gov­ern­ment to pro­vide the agency with per­ma­nent, ded­i­cated fund­ing, but it side­steps the po­lit­i­cally charged question of what kind of tax or other mech­a­nism should be adopted for that pur­pose.

The study also calls for re­plac­ing Metro’s en­tire, 16-mem­ber board with a five-mem­ber “re­form board” for three years. LaHood has aired the pro­posal pre­vi­ously, but the re­port says ex­plic­itly a new board is needed to make “tough de­ci­sions” such as cut­ting pen­sion benefits and re­duc­ing bus service.

The 24-page re­port, a copy of which was ob­tained by The Wash­ing­ton Post in ad­vance of its re­lease later this month, was com­mis­sioned in March by Vir­ginia Gov. Terry McAuliffe (D). The study pro­vides a foun­da­tion for the next phase of an in­tense de­bate in the re­gion over how to re­struc­ture Metro’s gov­er­nance and meet its fund­ing needs.

The study is the most com­pre­hen­sive in­de­pen­dent anal­y­sis of Metro’s struc­ture and fi­nances in years. It finds that Metro suf­fers fi­nan­cial pres­sures partly be­cause it pro­vides about 20 per­cent more service per rider than other large tran­sit agen­cies.

It urges rais­ing bus fares from a base level of $2 to $2.10, which is closer to the av­er­age of $2.16 among peer agen­cies. It also calls for a ma­jor over­haul of bus routes to “of­fer service that matches ac­tual de­mand.” The com­bined sav­ings could be $38 mil­lion a year.

Com­pa­ra­ble re­duc­tions in rail service could be nec­es­sary as well, the study says, if rail rid­er­ship fails to re­bound as Metro hopes.

The re­port finds Metro’s over­all la­bor costs are av­er­age com­pared with sim­i­lar tran­sit sys­tems — with the ex­cep­tion of

some pen­sion benefits that are too gen­er­ous and should be trimmed. For ex­am­ple, hourly work­ers who con­trib­ute about 3 per­cent of their pay­checks to pen­sions should be re­quired to raise that closer to the na­tional av­er­age of 7 per­cent. That would re­duce the need for sub­si­dies by $25 mil­lion per year.

The re­port en­dorses the lead­er­ship of Metro Gen­eral Man­ager Paul J. Wiede­feld, who is about to com­plete his sec­ond year in the po­si­tion.

“Wiede­feld has not shied away from tak­ing on the prob­lems that have plagued [Metro] for years,” it says. It praises him for clos­ing lines tem­po­rar­ily to en­sure safety, for ter­mi­nat­ing low-per­form­ing em­ploy­ees and for re­duc­ing service to man­age costs.

“He is the right per­son for the job at hand,” LaHood says in the re­port.

The cen­ter­piece is a five-page cover let­ter from LaHood to McAuliffe out­lin­ing seven key find­ings and six rec­om­men­da­tions. The let­ter is sup­ple­mented by a 19-page re­view of Metro’s “oper­at­ing, gov­er­nance and fi- nan­cial con­di­tions,” done in large part by the con­sult­ing group WSP.

To­gether, the doc­u­ments lay out a de­tailed ar­gu­ment for how to make Metro more ef­fi­cient and why it needs at least $500 mil­lion more per year in ded­i­cated fund­ing from the Dis­trict, Maryland and Vir­ginia.

It sug­gests ways to save money on service and la­bor costs to show the gov­ern­ments that fund Metro they’re not throw­ing good money af­ter bad. The call for a rad­i­cal re­struc­tur­ing of the board is also de­signed to demon­strate to fun­ders that it’s no longer busi­ness as usual at the agency.

Among other things, the re­port says Metro could save $18 mil­lion a year by re­duc­ing fare eva­sion. An­other $7 mil­lion a year could be saved by curb­ing ab­sen­teeism.

Metro’s ad­ver­tis­ing rev­enue is “pro­por­tion­ally the low­est among the large tran­sit agen­cies stud­ied,” the re­port says. Metro could reap an ad­di­tional $10 mil­lion a year from ad­ver­tis­ing if it matched the per­for­mance of Chicago’s sys­tem, for ex­am­ple.

Metro’s cap­i­tal pro­gram has suf­fered not only from in­ad­e­quate fund­ing but also from the agency’s fail­ure to spend al­lo­cat- ed funds.

“For much of the last decade, [Metro] was rarely able to spend more than 80 per­cent of the cap­i­tal funds it bud­geted for a given year,” the re­port says. Per­for­mance has “im­proved markedly” un­der Wiede­feld, but in­vest­ment will have to con­tinue rising.

At current fund­ing lev­els, how­ever, the re­port says Metro would not even have enough to ad­dress the new needs that arise each year, let alone tackle the back­log that has ac­cu­mu­lated.

WSP, the con­sul­tant, es­ti­mates that Metro needs an ad­di­tional $540 mil­lion a year in ded­i­cated fund­ing for cap­i­tal ex­penses, but LaHood says the tar­get should be $500 mil­lion — be­cause the gap can be cov­ered by sav­ings in oper­at­ing costs.

Metro’s “prob­lems will never be solved with­out this new money,” LaHood says. “[Its] in­fra­struc­ture is ag­ing and needs re­newal, and the fund­ing it re­ceives to­day is not enough to get this done. Not even close.”

The re­port also pro­vides back­ground on how Metro suf­fered from years of un­der­in­vest­ment, es­pe­cially af­ter many parts of the rail sys­tem be­gan to reach the end of their 30-year use­ful life around 2006.

“The sys­tem is now 40 years old and much of it needs re­newal or re­place­ment,” the study says. “Un­for­tu­nately, the fun­ders that pay for [Metro’s] cap­i­tal pro­gram have grown ac­cus­tomed to con­tribut­ing at a level ad­e­quate for a new sys­tem, but far too low for an ag­ing sys­tem.”

LaHood says the ex­tra rev­enue should come in the form of ded­i­cated fund­ing — a re­li­able stream of ear­marked rev­enue. That al­lows the funds to be pledged to re­pay bonds and thus al­low Metro to bor­row more eas­ily on fi­nan­cial mar­kets.

How­ever, in an omis­sion that will dis­ap­point many Metro sup­port­ers, LaHood de­clines to en­dorse a par­tic­u­lar tax or other in­stru­ment to pro­vide such fund­ing. The de­ci­sion re­flects his in­abil­ity to find a con­sen­sus within the re­gion, whose top of­fi­cials are sharply di­vided over the is­sue.

“I am not propos­ing a spe­cific method be­cause many dif­fer­ent ar­range­ments would work,” LaHood says.

Each fund­ing part­ner “can gen­er­ate its share in a way that makes sense for them. The meth­ods can be dif­fer­ent so long as the key cri­te­ria are met: the to­tal is suf­fi­cient, the funds are ded­i­cated, and they ar­rive soon,” the re­port says.

LaHood also calls for the fed­eral gov­ern­ment to in­crease its con­tri­bu­tion to Metro. In an un­fore­seen rec­om­men­da­tion, he says Congress should pro­vide it in ded­i­cated fund­ing, rather than an­nual ap­pro­pri­a­tions as at present.

The current fed­eral sub­sidy, which ex­pires in two years, pro­vides Metro with $150 mil­lion a year in cap­i­tal fund­ing. Some politi­cians and Metro ob­servers have said the most the agency can ex­pect from Congress is an ex­ten­sion of that sub­sidy, rather than an in­crease.

“Achiev­ing an in­crease in fed­eral funds will be dif­fi­cult, but I trust that the mem­bers of the House and Se­nate that rep­re­sent this re­gion will do all they can to make it hap­pen,” LaHood says.

If LaHood’s pro­pos­als are to be adopted, the ini­tial goal, once the re­port is re­leased, will be to per­suade the Dis­trict, Maryland, Vir­ginia and the fed­eral gov­ern­ment to re­place and shrink the board.

LaHood de­clined to com­ment for this story, say­ing he was await­ing the re­port’s of­fi­cial re­lease. But he has said in the past that ma­jor changes in gov­er­nance are nec­es­sary to per­suade local gov­ern­ments and Congress to con­trib­ute more money.

“The agency’s board is too large, too frac­tious and too ori­ented to­ward in­ter­ests of the re­gion’s in­di­vid­ual ju­ris­dic­tions rather than the needs of the re­gion as a whole,” LaHood says in the re­port. “For the next sev­eral years, the board will need to fo­cus on one thing: mak­ing the sys­tem safe and re­li­able. This will re­quire tough de­ci­sions, and jock­ey­ing for po­si­tion among the re­gion’s ju­ris­dic­tions will need to take a back seat.”

Lahood’s re­port says the change should be ac­com­plished with­out re­vis­ing the Metro com­pact, which spells out how Metro is gov­erned and funded. Amend­ing the com­pact is a lengthy, cum­ber­some process, and LaHood says the agency can’t af­ford the time it would take.

The re­port does not spell out how the board would be re­placed. The most prob­a­ble sce­nario is that McAuliffe, Maryland Gov. Larry Ho­gan (R), D.C. Mayor Muriel E. Bowser (D) and U.S. Trans­porta­tion Sec­re­tary Elaine Chao would all ask their rep­re­sen­ta­tives on the board to re­sign. They each would then ap­point a sin­gle rep­re­sen­ta­tive to the re­form board, and those four would select a chair­man.

McAuliffe strongly sup­ports a board over­haul, and his newly elected suc­ces­sor, Gov.-elect Ralph Northam, is expected to do so as well. Ho­gan re­cently said he would back LaHood’s plan to over­haul the board, while Bowser has been less sup­port­ive. Chao’s po­si­tion is un­cer­tain.

To­ward the end of his re­port, LaHood sums up his po­si­tion by say­ing he can be “op­ti­mistic” about Metro’s fu­ture only if his rec­om­men­da­tions are fol­lowed.

“The last decade has not been a good time for [Metro], and we need to make ma­jor changes to its lead­er­ship, op­er­a­tions and fund­ing to turn this around,” he says.

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