Allowing Metro to deteriorate further will slow the region’s growth and could eventually cost area governments $1 billion or more a year in lost tax revenue, a group of the region’s elected officials and business leaders were told Wednesday.
To that end, finding new funds for Metro, and insisting that it improve its performance, are both critical to the region’s economic future, according to an initial study approved by the Metropolitan Washington Council of Governments (COG).
The leaders were urged to create a new tax or other dedicated funding stream for the transit agency as the most cost-effective way to raise the billions of dollars needed over the long term to maintain and upgrade the troubled system.
“While Metro must be held accountable, it must also be supported, politically and financially,” the report said. “Failure is not an option.”
The report lent support to the recent call by D.C. Mayor Muriel E. Bowser (D) to create a dedicated revenue source for Metro, such as a 1-cent regional sales tax.
The study said that reliable funding would enable Metro to borrow on the nation’s bond markets, saving the agency about $2.5 billion over 10 years — even after paying the interest. A dedicated stream of revenue for Metro is important to Wall Street, because it gives lenders confidence that they’ll be repaid.
“If you have dedicated funding, you can do debt financing,” COG Deputy Director Stuart A. Freudberg said. “That’s a very important part of the model.”
The report also marked a step forward in an effort by COG’s current chairman, Montgomery County Council member Roger Berliner (D-Potomac-Bethesda), to make fixing Metro the region’s top priority.
COG has been working with business and civic groups to develop a proposal for a dedicated funding source to propose to the Virginia and Maryland legislatures in early 2018.
The interim, technical study issued Wednesday is to be followed by a final report, due March 30, that will provide more details. It will discuss specific funding options, which could include a regional sales tax, gasoline tax, registration fees or user fees. Different jurisdictions might use different methods to raise the money.
But winning political support for higher taxes or other measures will be a significant challenge. Efforts have been made in the past in Metro’s 40-year history, only to fail because of opposition to higher taxes or lack of regional cooperation.
The obstacles were evident at the recent regional “summit,” where Bowser publicly urged Maryland Gov. Larry Hogan (R) and Virginia Gov. Terry McAuliffe (D) to act next year to approve dedicated funding for Metro.
Hogan was cool to the idea — without ruling it out — and McAuliffe said Metro needed to improve safety and reliability before he would consider it. Hogan later softened his position, saying that if Montgomery and Prince George’s residents want to tax themselves to pay for Metro, then “that’s for them to decide.”
Another potential roadblock emerged Wednesday with a warning by COG Vice-Chair Matthew F. Letourneau, a Loudoun County supervisor and COG’s highest-ranking Republican.
He said the GOP-dominated Virginia legislature would be wary of approving new funding for Metro because Republicans don’t like union protections in the Metro Compact, the founding document that spells out regional cooperation in funding and governing the agency.
The compact guarantees that labor contracts will be subject to binding arbitration, which effectively guarantees that pay and benefits rise in each round of bargaining.
“For the General Assembly, that’s going to be a very big issue,” Letourneau said after Wednesday’s meeting. “They’re going to want to see cost constraints on [Metro] personnel.”
But Letourneau agreed that finding a dedicated revenue source is crucial to make it possible to tap the bond markets. He cited the study’s finding that such financing would lower the average annual cost over 10 years from $542 million to $290 million.
Dedicated funding also drew a robust endorsement at the meeting in colorful comments from James C. Dinegar, chief executive of the Greater Washington Board of Trade.
He was invited to speak to assure the elected officials that the business community is supportive of efforts to raise taxes or other funds for Metro.
“There is no Plan B. What do you want, bike paths along the Metro?” Dinegar said. “You’ve got to have dedicated funding. Metro is the economic engine of the region.”
Reminding everyone of the negative impact of Metro shutdowns, such as during the current accelerated SafeTrack maintenance program, Dinegar said, “If you want to have the scariest costume for Halloween, you should dress up as the Red Line, because next week, it is going to be awful.”
In describing Metro’s long-term financial needs, the 15-page COG report relied heavily on a study done by Jeffrey DeWitt, the District’s chief financial officer.
It found that Metro, in the next 10 years, will have an average shortfall of $212 million a year in its operating budget and $330 million a year in its capital needs.
Those shortfalls will arise even if Metro continues to get all the funding it currently receives, and, in some cases, more. But the study found that the region could not afford to let Metro deteriorate, because the economic damage would be so severe.
DeWitt’s report concludes that “failure to invest in Metro, to restore it to a safe, reliable system in state of good repair, could reduce regional economic growth by 0.25 to 0.5 percent or more, reducing regional economy and tax revenue by $1 billion to $2 billion [annually].”
It also found that Metro delays during the morning rush hour alone between June 2014 and June 2015 cost 1.2 million person hours.
The study also looked at various performance metrics that COG or other governmental bodies could use to measure Metro’s improvement. Local and state leaders have said they want to see measurable gains in safety, reliability, customer service and financial management before agreeing to increase Metro funding.