The District government had collected more than twice as much money for Metro as it owed when the city defaulted on two payments this year, which appears to violate its decade-old promise to provide "stable and reliable" financing for the regional transit system.
District officials said they used the money during their cash-flow crisis to pay other city bills. While most Metro board members are reluctant to publicly criticize the District, some have raised questions privately about whether the District can legitimately defer payments to Metro while it is collecting enough tax money to pay its share of operating costs.
District records show the city collected $301 million in its Metro account for the budget year that ended Sept. 30. The city owed Metro $120 million in that fiscal year, but in July and October failed to make payments totaling $57 million.
That forced Metro to borrow about $8 million to pay its bills, the first time the transit agency took out a loan because one of the local governments couldn't meet its obligations.
The city finished paying Metro last week, including interest and penalties, but has warned potential investors in city bonds that it may have to delay future Metro payments until the fiscal situation improves. The District's budget deficit may reach $200 million next year.
"If we can't remedy the budget imbalance, we'll face similar problems next year," said Robert Pohlman, deputy mayor for finance.
Under a 1979 agreement among the District, Maryland and Virginia, the local governments said they would provide a "stable and reliable" source of money to make up the difference between revenue from fares and operating costs, or about $265 million this year.
That agreement was key to getting the Metro system built. Before federal officials would provide construction money, they wanted to ensure that the local governments would be able to guarantee they had enough money to pay the operating costs.
The District pledged to pay Metro from money it collects from gasoline taxes, motor vehicle registrations and excise taxes, parking and traffic fines and sales taxes.
Usually enough money is collected from those fees and taxes to pay Metro, but if the collections fall short, the District promised Metro it would dip into other general fund revenue to cover the bill.
"Obviously, there is enough money to pay Metro," said Elaine Mittleman, an area lawyer who researched the issue in connection with an unrelated lawsuit. "All the other jurisdictions have made the same commitment to pay their bills on time."
Pohlman did not dispute that the city had enough money to pay Metro, but said the city's fiscal crisis required the city to use the money to pay other bills.
The city faces the challenge of meeting its payroll and the rising costs of prison and social service programs while tax revenue is declining because of the slumping regional economy.
"Clearly, the money was coming in during the year" to the Metro account, Pohlman said. "All revenues back up the Metro contribution, but there may be circumstances when that can't be met."
In addition to the Metro payment, the District deferred a $55 million payment to the pension fund for city employees and postponed making $45.3 million in other payments from last fiscal year until this fiscal year, which began Oct. 1.
Pohlman said the city acted legally in using the Metro account money to pay other bills and had no intention of backing out of its commitment to the transit agency.
Most Metro board members said that while they question whether the diversion of money is legitimate, the city had no other choice.
"No, it's not a good practice, but what you're facing is a situation of cash-flow problems," said board member Matthew S. Watson, of the District.
Board member Robert B. Ostrom, of Prince George's County, said, "It's not a great practice, but it would only bother me if they didn't pay their bill."
Metro spokeswoman Beverly Silverberg said transit officials won't press the issue unless the District stops paying its share.
"Metro's concern is that there truly be a stable and reliable source of funding for the system," she said. "How they meet that commitment is their business, as long as they meet it."
The federal government could withhold construction money to Metro if the local governments fail to come up with their contribution, Metro and federal officials said.
But unless the local governments as a group can't pay their share of Metro costs, "there is no issue for the federal government," said Steve Diaz, general counsel for the Urban Mass Transportation Administration.