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Leaders Find Tax Increase To Aid Metro Unappealing

Plan Considered to Fund Trains, Buses, Other Needs

By Steven Ginsberg
Washington Post Staff Writer
Saturday, January 1, 2005; Page B01

Leaders in Washington, Virginia and Maryland have responded coolly to the recommendation of a regional panel to raise sales taxes as much as a half-percent to pay for new Metro cars, buses and other needs.

Maryland Transportation Secretary Robert L. Flanagan said that he had not seen the official proposal from the panel's business and civic leaders but that Gov. Robert L. Ehrlich Jr. (R) "has indicated that he would not support a sales tax increase."

Tim Pickeral works at Columbia Heights. The head of a panel studying Metro funding says the system "is in dire need of spending on capital maintenance." (Rick Bowmer -- The Washington Post)

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Findings on Metro

These are among the findings of the regional panel appointed to study Metro's money problems:

The Problem

History: Metro, which opened in 1976, has completed its original construction plan and is beginning to show its age. To keep the transit system running, Metro each year appeals for funding to two states, the District of Columbia, eight local jurisdictions and the federal government for funding. Unlike other transit agencies, it has no steady, guaranteed source of money.

Future: During the next 20 years, the cost of renewing and maintaining the system will approach the original cost of construction. Operating expenses will continue to grow as inflation pushes costs higher and demand for service increases. Unless the system changes, Metro will continue to compete for funding with schools, roads, health care and other priorities in all the jurisdictions.

Proposed Solutions

First choice: The panel recommends an increase in the sales taxes in the jurisdictions that belong to the Metro service area. This is the most practical method, the panel says, and it captures money not only from regional residents but also from visitors who use the system.

Second choice: A regional payroll tax, equivalent increases in property tax rates or a special real property assessment.

Fares: Fare increases should be implemented in a way that maintains the fare box operating ratio average 57 percent.

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Gregory McCarthy, deputy chief of staff for D.C. Mayor Anthony A. Williams (D), said the proposal was "something worth looking at," but he was concerned that it would exacerbate existing inequities in Metro funding. "To have a sales tax that treats us all equitably when we're not treated equitably now would be a problem for us," he said.

Virginia leaders said there is little appetite for even discussing a regional sales tax boost because 2005 is an election year and because lawmakers already raised the statewide rate a half-cent on the dollar in 2004.

Gov. Mark R. Warner (D) has not proposed raising taxes for Metro and limited his comments about the panel's recommendation to a statement through spokeswoman Ellen Qualls saying that his "legislative proposal certainly recognizes the reality of Metro capital needs."

"The panel," the statement continued, "is to be commended for identifying the very clear, long-term needs of Metrorail."

The sales tax increase is the primary recommendation of a 13-member regional panel brought together by the Metropolitan Washington Council of Governments, the Greater Washington Board of Trade and the Federal City Council to come up with a dedicated funding source for Metro.

Washington's transit system does not have a dedicated funding source, such as a tax or a share of a tax, as do many systems nationwide. The lack of such a source means that Metro must ask for money from local governments each year. The only dedicated funding that the system receives is from a 2 percent gas tax levied in Northern Virginia that covers about 1.6 percent of Metro's costs.

"Our main point is that some dedicated tax is necessary," said Rudolph G. Penner, senior fellow at the Urban Institute and chairman of the panel. "The Metro system is in dire need of spending on capital maintenance, and it's very hard to make a capital plan unless you have a reliable, stable source of revenue."

Penner said the panel considered several tax options, including raising gas taxes or instituting parking fees, but chose a sales tax because it was broad-based and easy to administer. He added that "if the communities choose one of our other options, that's fine, too."

The tax proposal was released as part of a draft report; the panel will submit its final report Thursday, and members said it would not divert from the draft.

The panel said that the federal government should chip in to cover as much as half of Metro's projected shortfall, estimated at $236 million a year through 2015, because its workers compose so much of the system's riders. If that happens, the sales tax increase could be reduced to a quarter-percent, the report said.

The panel also said that MetroAccess, the system's door-to-door service for the disabled and elderly, is a service to society rather than a transportation concern, so its funding ought to come from social service money. MetroAccess costs are growing at an annual rate of 32 percent and are projected to be about $50 million this fiscal year.

The strongest backing for the sales tax has come from business leaders, who say that firming up Metro's finances is critical to maintaining the region's economic boom as well as its transportation network.

"If Metro wasn't working properly, there would be even more congestion on roadways," said Bob Grow of the Greater Washington Board of Trade.

Local leaders in Virginia also signaled some support, noting that large majorities in Fairfax and Arlington counties voted for $128.5 million in funding for Metro in referendums Nov. 2.

"This region has a potentially bright future in employment growth," said David F. Snyder, a Falls Church City Council member and chairman of the Northern Virginia Transportation Authority, which endorsed the panel's recommendations. "This is really a test of whether the political leadership in this region is capable of providing infrastructure the private sector needs to flourish and grow."

Panel members said they were aware that raising sales taxes would not be an easy sell and most likely would require a protracted fight.

"We all understood that we wanted to come up with something achievable or doable," said Gus Bauman, a lawyer with Beveridge and Diamond who serves on the panel. "But we're not operating under any illusions that this will happen tomorrow."

© 2005 The Washington Post Company