By James Hohmann
Washington Post Staff Writer
Tuesday, September 8, 2009
Metro officials are projecting a major budget shortfall next year, with expenses ballooning by more than $90 million and revenue dropping by nearly $40 million, according to a budget forecast prepared by the agency's staff.
The forecast, to be presented to board members Thursday by Chief Financial Officer Carol Kissal, is intended to offer early guidance and start discussions over how to plug one of the largest budget gaps in the transit agency's 33-year history. The proposed $1.46 billion budget is for the fiscal year that begins July 2010.
Metro General Manager John B. Catoe Jr. is expected to present a budget to the board by December.
Metro's leaders have warned that they might have to raise fares because of the poor economic climate. Last year, the agency consolidated bus routes, laid off hundreds of employees and tapped its rainy-day fund to close an even larger budget deficit, but it avoided raising fares. Board members acknowledge that the choices will be tougher this time.
"There is nobody who wants to raise fares, not a single one of us," said Peter Benjamin, chairman of the board's finance committee. "The fare decision is essentially the last one in that series of things. It's only when you have exhausted all other possibilities that you get down to service and fares."
As part of a compromise vote that raised fares in January 2008 for the first time in four years, the board agreed in principle that fares should increase with the rate of inflation every other year.
Those fare increases, which are expected to amount to about 6 percent, are still open to public debate, but the budget forecast assumes $37.5 million in additional revenue from inflation-adjusted fares.
A 5-cent increase would generate $15 million to $17 million. A 10-cent increase would generate about $35 million. Last year, some riders said they would prefer a fare increase to service cuts.
According to the forecast, the transit agency's operating expenses are expected to increase by $90 million, largely because of a growing population of elderly and disabled clients using the MetroAccess paratransit service, increased pension costs and rebounding energy costs.
MetroAccess, the agency's costliest and fastest-growing service, will probably be central to discussions about controlling expenses. Next year, the cost of transporting its clients is projected to rise $19.7 million, or 25 percent, an amount the report describes as "unsustainable."
In April, the board tapped the rainy-day fund to avert some planned Metrobus service cuts. Arlington County Board member Christopher Zimmerman (D), who represents Virginia on the Metro board, was the sole member to vote against doing so. He warned that using reserves would only defer Metro's problems.
"Everybody's going to be looking at another tough year," Zimmerman said. "My view was that we put some things off that we should not have put off."
Zimmerman said an additional $37.5 million that would be generated from a fare increase would not be enough to "cover the kinds of gaps we have in this situation."
Metro officials said it is too early to speculate about fare increases or service cuts.
"This is the start of a very lengthy and meticulous process that will not be finalized until July 2010," said Metro spokeswoman Lisa Farbstein, describing the pro-forma budget forecast. "It leaves virtually no rocks unturned in terms of where we can generate revenue or make strategic cuts, if that's even on the table."
The budget debate tends to pit city officials, who want low fares for low-income passengers, against suburban ones, who want to control parking fees and fare costs for suburban commuters. The District's representatives kept fare increases off the table last year, pushing service cuts instead. Board action requires at least one vote each from the District, Maryland and Virginia.
Slightly less than half of Metro's operations funds come from governments in the region. The forecast anticipates that there is a "low probability" of an increase in the subsidy from those jurisdictions, largely because they are facing their own shortfalls.
But an official of a riders advocacy group wants participating jurisdictions to increase their support as fares go up. Jack Corbett, a director of http://MetroRiders.org, said there is an inherent conflict in the way Metro's board is organized because the jurisdictions that subsidize Metro appoint representatives to the board.
"So they're caught in a box," he said. "Given the huge gap, both the jurisdictions and the riders have to be flexible, because there's no fat left in the system from what we can find."
Benjamin said that early estimates are usually conservative and that there is no reason to panic. "There's a tendency for everyone to panic and say, 'Oh, my God!' "
"Is it going to be easy? Probably not," he said. "But it'll work out. . . . The sky is not falling. This is a good starting point."
Staff writer Lena H. Sun contributed to this report.