Pen­sion costs cited as Metro ser­vice threat

The Washington Post Sunday - - COMMUTER -

Metro’s ris­ing pen­sion costs threaten its fu­ture op­er­at­ing po­si­tion, po­ten­tially ham­per­ing its abil­ity to pro­vide ser­vice if the agency fails to rein in un­funded re­tire­ment and health-care li­a­bil­i­ties, ac­cord­ing to a re­port from the Gov­ern­ment Ac­count­abil­ity Of­fice.

The 53-page re­port raises con­cerns about Metro’s nearly $3 bil­lion in un­funded re­tire­ment and health-care costs, and notes that its $4.7 bil­lion in to­tal pen­sion li­a­bil­i­ties rep­re­sents about 6.5 times what the agency spends an­nu­ally on salaries and wages.

Metro’s an­nual pen­sion costs grew by an av­er­age of nearly 19 per­cent from 2006 to 2017, the fed­eral re­port said, mak­ing pen­sions the agency’s fastest­grow­ing work­force cost as its to­tal la­bor costs grew about 3 per­cent a year.

With the scale of the obli­ga­tions, the re­port posits that in the event of an un­fa­vor­able fi­nan­cial mar­ket, Metro could be backed into a cor­ner to cover its obli­ga­tions. The scale of the pen­sion li­a­bil­i­ties means that a drop of less than one per­cent­age point in Metro’s in­vest­ment re­turn on its pen­sion fund could squeeze its op­er­at­ing bud­get to the point that the agency would need to re­duce ser­vice or ask the ju­ris­dic­tions that fund it to cover the short­fall.

“Due to their rel­a­tive size, pro­por­tion of re­tirees com­pared to ac­tive mem­bers, and in­vest­ment de­ci­sions, th­ese pen­sion plans pose sig­nif­i­cant risk to [the Wash­ing­ton Metropoli­tan Area Tran­sit Au­thor­ity’s] fi­nan­cial op­er­a­tions, yet WMATA has not fully as­sessed the risks,” the GAO con­cluded. “With­out com­pre­hen­sive in­for­ma­tion on the risks fac­ing its pen­sion plans, WMATA may not be pre­pared for eco­nomic sce­nar­ios that could in­crease its re­quired con­tri­bu­tions to an ex­tent that might jeop­ar­dize its abil­ity to pro­vide some tran­sit ser­vice.”

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