« Experts' Views on Region's Economy | Main | A Thought on the Prospects of Young People »

Is Metro's Burden on Taxpayers About to get Even Bigger?

On Tuesday, September 8, we growled about Metro's "mishaps" and that the subsidies contributed to Metro have been growing at twice the rate of total Arlington County expenditures for the 10-year period FY 2005 through FY 2014.

Now comes news that Metro's budget for FY 2017 will place a "big burden on region's taxpayers," according to WAMU Radio 88.5's Martin Di Caro. In a story posted last Thursday, DiCaro wrote:

"The Washington metropolitan region’s troubled transit authority has another problem: its budget.

"In a 10-year outlook to be presented to the authority’s board of directors Thursday, Metro staff will explain a forecast of expenses growing significantly faster than revenues.

"The burden could fall on taxpayers in Metro’s already stretched member jurisdictions in D.C., Maryland, and Virginia.

"Long gone are the pre-recession days of growing rail ridership and fare revenue. Metro’s new normal is declining ridership (down about 8 percent over five years) and stagnant revenue growth.

"From now until 2025, the agency’s chief financial officer forecasts revenue growth of between 1 and 3 percent annually, while costs — mostly driven by personnel expenses tied to contracts with unionized employees — are expected to grow 6 percent per year.

“Clearly what Metro is facing is unsustainable,” said Robert Puentes, a transportation policy analyst at the Brookings Institution.

"The scenario is so troubling that Metro is kicking off its fiscal 2017 budget process early. That fiscal year doesn’t start until July 1, 2016.

"The jurisdictions coughed up a lot of extra money to balance Metro’s current operating budget of $1.8 billion, and the authority’s financial managers would like to keep subsidy growth at 3 percent annually, acknowledging the reality that local tax revenues do not come from bottomless treasuries."

Di Caro's report includes a link to the Finance & Administration Committee's FY 2017 budget guidance document that included a 10-year outlook (through FY 2025) for revenues and expenses. The budget document listed the following four key highlights:

  • Metro's current FY2016 combined operating and capital budget is approximately $3.0 billion. That investment of passenger fares, local and state government funds, and federal funds produces over 340 million trips annually on Metrobus, Metrorail, and MetroAccess.
  • The critical challenge facing Metro in FY2017 is to improve transit service in the Washington region by investing more in safety, service quality, customer service, funding of long-term liabilities, and increased capacity, while at the same time staying within jurisdictional budget constraints.
  • Operating expense growth is currently greater than operating revenue growth, leading to substantial projected long-term increases in jurisdictional subsidy. Sustainable jurisdictional subsidy growth will require that expense growth be reduced from its current trend, including both personnel and non-personnel areas across the Authority. (Emphasis added)
  • In the capital budget, competing needs for future funding as well as uncertainty regarding future federal funding must be addressed in the context of a renewal of the Capital Funding Agreement (CFA), which expires at the end of FY2016. (emphasis added)

Two especially interesting data points from the FY 2017 budget guidance are the two cost recovery numbers. The first is the cost recovery from the operating budget, which is 52%. The second is the total cost recovery (operating budget and capital budget), which is 31%. Costs not recovered require subsidies from local governments. In the case of Arlington County, these subsidies, or contributions to Metro, have grown at a rate of 10.3% from FY 2005 through FY 2014 compared to an annual growth rate of 4.6% for total county spending.

After noting that "Metro jurisdictions are tapped out," Di Caro observed:

"The jurisdictions coughed up a lot of extra money to balance Metro’s current operating budget of $1.8 billion, and the authority’s financial managers would like to keep subsidy growth at 3 percent annually, acknowledging the reality that local tax revenues do not come from bottomless treasuries."

So Metro's financial managers want to hold subsidy growth to 3%, eh? And how will members of the Metro board achieve that? Good luck!

With Arlington County Board members and county staff holding all kinds of meetings recently for such things as the Affordable Housing Master Plan, Fire Station #8, land swap with Virginia Hospital Center, and the community facilities study, perhaps it slipped their minds to discuss the renewal of the Capital Funding Agreement (CFA), which expires at the end of FY2016. Or does the Arlington County Board prefer to hold such meetings in secret. But then, I'm just asking.

The Washington Post's Paul Duggan also posted an extensive story for the Friday editions. It, too, is also worth reading in its entirety. His report included the following observations:

"Metro’s chief financial officer, Dennis Anosike, told the board’s finance committee Thursday that the gap between costs and revenue is projected to keep widening over the next decade — putting more pressure on fare-payers and jurisdictions — unless the transit agency begins attracting more riders.

"That means that Metro would need to improve its performance. On that score, the agency’s most recent quarterly report card, called a “Vital Signs” report, doesn’t offer much encouragement. The report for April, May and June, presented to the board’s customer service committee Thursday, angered some board members.

“Rail on-time performance was significantly worse” in those three months than it was during the second quarter last year, Metro’s chief performance officer, Andrea Burnside, told the committee. With a lot of subway cars stuck in rail yards because of mechanical trouble, she said, trains were too often late and stuffed with passengers."

One of the current candidates for the two openings on the Arlington County Board "is taking a stand against TitleMax, which he deems a “predatory lender," according to a report on Friday at ARLnow.com, a business operating according to the laws of Virginia. Instead of being anti-business during a period when Arlington County should be partnering with Arlington County businesses trying to fill the thousands of square feet of currently vacant commercial space, one candidate for the County Board is seeking to show the county's anti-business side. As we pointed out in growling about economic development on March 13, 2015, filling up that commercial space can have a very positive impact on taxes paid by Arlington County residential real estate property owners.

Another question! Have the four candidates for the Arlington County Board been briefed about the Capital Funding Agreement? The question seems especially relevant since the two candidates who win the November 3, 2015 election will have to govern within the bounds of that agreement. Or is the agreement being negotiated in secret?

Growls readers who are Arlington County taxpayers, and wish to comment on economic development, should communicate your concerns to members of the the Arlington County Board. Just click-on the link below:

  • Call the County Board office at (703) 228-3130.

And tell them ACTA sent you!

TrackBack

TrackBack URL for this entry:
http://www.acta.us/growls-mt/mt-tb.fcgi/3176