Metro is facing a financial crunch that will force the regional transit agency to slash $11.7 million from its budget or ask for more money from financially strapped local governments, Metro officials said yesterday.
Higher bus fuel costs stemming from the Persian Gulf crisis and smaller-than-expected growth in the number of rail passengers have contributed to the problem, officials said. The projected deficit is one of the first concrete effects of the economy on Metro, which until now had avoided the shortfalls felt by the region's local governments.
This year's budget assumed 4 percent growth in the number of riders, but the increase has been about 1 percent. In September, Metro had an average weekday ridership of 507,000 trips, up only 1.2 percent from last year. For the quarter that ended Sept. 30, ridership was 3.4 percent less than forecast.
Usually, Metro breaks even in its operating budget or has a surplus, which is put back in the budget or returned to local governments to lower their share of costs.
The gloomy forecast comes as Metro is heading into a rough period financially while seeking a new general manager.
General Manager Carmen E. Turner, who leaves in December to become the Smithsonian Institution's top manager, said yesterday's report amounts to "an early warning" to the board for the fiscal year ending June 30. Turner said a $3.4 million increase in costs and an $8.3 million decrease in revenue have led to the projected deficit.
"It's rare to see one of that magnitude," said board member Cleatus E. Barnett, of Montgomery County, the Budget Committee chairman.
The budget projections added another worry for the board, which met privately yesterday to plan the search for a successor to Turner, whose seven-year tenure has been widely praised. Next week, the board begins the wrenching process of determining how high it will raise fares next year.
Board members were told recently that even if they raise fares 5 percent every two years -- highly unlikely because of rider backlash -- local government contributions will nearly triple by the year 2010, to $1 billion annually.
Like all transit systems, Metro covers only half its costs with revenue from fares, so local governments pass the hat to make up the difference in subsidies. The District has had trouble making its payments this year.
The economy's downturn has saddled the region's governments with unexpected revenue shortfalls: $100 million in the District and Fairfax, $68 million in Montgomery and $50 million in Prince George's.
Asking local governments to give an additional $11.7 million on top of their $265 million annual subsidy is probably unrealistic, board members said, so they will concentrate on cutting costs without affecting daily rail and bus service.
"The thrust here will be to deal with it internally," Barnett said.
That may be difficult. Turner gave the board's Budget Committee a list of suggested cuts, but acknowledged that the list is incomplete and falls short of the $11.7 million target.
Among the options available to the board to find $11.7 million are freezing hiring and cutting advertising, professional and technical services, management audits and other non-personnel costs.
Even if the board took those steps, Metro would be $6.6 million in the red. "The challenge now is to go back and do an awful lot of work and identify an additional $6.6 million to bring the budget in line," Turner said.
Moreover, she said, the board needs to consider ways to generate more passengers in an uncertain economy.
Projected over the rest of the year, the ridership drop-off translates into a $5 million loss in fare revenue. Delays in finishing segments of two lines also prevent Metro from collecting $1.3 million in revenue.
Though officials aren't completely sure what is causing the decline, they believe that rising unemployment has resulted in fewer commuters than expected. Discretionary trips, such as to stores and museums, also are being put off because of the weak economy. And there have been fewer tourists in Washington, which has seen a 10 percent drop in hotel bookings this year.
Easier to understand is the rise in fuel costs. Metro's 1,600 buses burn about 16.5 million gallons of diesel fuel a year. Officials had budgeted fuel costs at 66 cents a gallon this year, but the worldwide rise in oil prices after Iraq's invasion of Kuwait caused an increase to 88 cents a gallon. That translates to a $4.8 million jump in fuel costs for Metro.
Overall, Metro's costs for this fiscal year are projected to rise from the original projection of $565 million to $568 million, while revenue is expected to decline from the original $300 million figure to $292 million. Unless the board finds $11.7 million to cut, the local government contribution would jump from $265 million to $276 million.
Board Chairman Mary Margaret Whipple, of Arlington, said the problem is "more that ridership is less than expected than that costs are higher."