Metro Needs Dedicated Funding, Study Says
By Lyndsey Layton
Washington Post Staff Writer
Thursday, June 3, 2004; Page A04
Metro is facing a financial crisis, the seeds of which can be traced to its position as the only major transit agency in the country without a significant source of dedicated funding, according to a new study by the Brookings Institution to be made public today.
While transit systems in New York, Boston, Chicago, San Francisco, Philadelphia and elsewhere are guaranteed a portion of a gas tax, sales tax or some other revenue to help pay their costs, Metro has to plead for financial aid each year from the District, Virginia and Maryland, according to Robert Puentes, senior research manager at Brookings and author of the study.
As Metro reaches middle age and must refurbish stations and replace and rehabilitate rail cars, buses and other costly equipment, its financial needs are exceeding the means of the local governments, Puentes said in an interview yesterday.
"It's a looming crisis," said Puentes, who plans to present his study to Metro's directors today. "The sources that Metro is relying on now may not be stable over time, particularly on the state level."
In Virginia, Puentes said, state officials expect money for transportation projects to fall by a total of $100 million during the next five years. In Maryland, the Ehrlich administration shifted $300 million from the transportation trust fund to balance the state budget in the past two years.
Metro does receive a sliver of dedicated money from a 2 percent gas tax levied in Northern Virginia on gasoline wholesalers and retailers, which pays 1.6 percent of the system's costs.
"Compared to other systems, [Metro] relies excessively on general fund revenues from its state and local partners," Puentes wrote. "This is, of course, a difficult problem for any transit agency. But for the fourth-largest agency in the country, such over-reliance is extraordinary."
Metro is considered the fourth-largest transit system in the country behind those in New York, Los Angeles and Chicago. When compared with other subway systems, Metrorail is second to New York in passengers carried. Metrorail carries more riders each year than the Philadelphia, San Francisco and Atlanta subways combined.
"We're treating our Metro system as one of the last remaining five-and-dime stores, instead of the Wal-Mart that it's become," said Richard A. White, Metro's chief executive. "We can't keep looking at this as the corner store. It's a behemoth."
It is also an "institutional orphan" for which no governor, mayor or legislature takes responsibility, he said.
Reliance on subsidies from local governments leaves Metro vulnerable to the vagaries of the political and economic climate in each jurisdiction, makes it difficult for transit managers to plan for long-term projects and forces transit to compete for dollars with education, public safety and other municipal needs.
Dedicated funding sources can raise a lot of money. Puentes estimated that a 1-cent regional sales tax in metropolitan Washington could generate $400 million a year -- covering the entire cost of the annual local subsidy.
Almost 20 percent of New York City Transit's budget of $6 billion in 2001 came from dedicated funds. The Massachusetts Bay Transportation Authority in Boston gets 20 percent of the state's sales tax. Nearly one-third of total funding for the nation's largest transit systems came from dedicated sources in 2003, Puentes found.
Metro is poised to raise passenger fares and fees for the second year in a row, and transit officials warn that Metro needs $1.5 billion in capital improvements in the next six years to keep the system functioning.
Puentes described six ways the region could create a dedicated source of money for Metro:
• Gas taxes. Transit advocates consider these a logical way to raise money for transit. But with increased fuel economy of new vehicles, gas taxes across the nation have hit a plateau, Puentes said. And political leaders are loath to raise gas taxes, he noted.
• Sales taxes. These are a common way to raise money for transit, because they are broad-based and a large amount of revenue can be raised with a small increase. But critics oppose them as regressive because they take a greater share of income from poor people than from the affluent.
• Congestion charges. These fees are levied when a motorist drives into a congested region or onto a crowded roadway during rush periods. Officials in Maryland and Virginia are considering the creation of express toll lanes on the Capital Beltway, where motorists would pay a toll to travel in an express lane.
• Parking taxes. This is an idea that has been floated in the region for 40 years but never executed because of political resistance.
• Land-value capture. This would be a special assessment on real estate around Metro stations, land that typically increases in value once a station is built. Los Angeles, Miami and Denver levy such taxes.
• Payroll taxes. These taxes on earnings would be assessed at the place of employment instead of residence. Cincinnati, Louisville and Portland, Ore., use payroll taxes to fund transit. In the Washington region, a 0.5 percent payroll tax would generate enough revenue to cover the $412 million paid in local subsidies to Metro, according to Puentes.
© 2004 The Washington Post Company