Metro must improve its management and accountability before local governments have the confidence to invest billions of dollars in expanding the transit system to handle the region’s expected growth, top transportation officials from Maryland and the District said.
The two officials described in separate interviews the kind of “turnaround expert” they want Metro to pick as its new chief executive.
They say that continuing problems with finances and safety show that Metro is poorly run from top to bottom. A sharp division between the jurisdictions and Metro’s board, which had Virginia’s support, provoked the current crisis over the transit agency’s leadership.
“There’s a need for across-the-board management improvement,” said D.C. Transportation Director Leif A. Dormsjo, who recently joined Metro’s board. “We want to fix the current situation and make sure that we’re in a position of strength to invest in Metro.”
Maryland Transportation Secretary Pete Rahn called the transit agency’s financial mismanagement “unforgivable” and questioned whether Metro ridership would increase enough in the next decade to justify expansion.
“Discussions of expansion have to be deferred for maintenance, and it means saying ‘no’ to some popular things until [Metro] has addressed throughout its system the issues of performance and safety,” Rahn said.
The two officials’ comments provided the first detailed account of what the District and Maryland hope Metro’s next leader will achieve. They also put the agency on notice that local government support for expansion is contingent upon a major upgrade in performance, especially regarding finances.
That attitude is important because Metro board members from those jurisdictions have the ability to derail the selection of a Metro general manager if they are dissatisfied with the candidates or the selection process.
Three area officials said they believe that one or more D.C. officials were responsible for a media leak that sank the initial effort to find a chief executive. A city spokesman denied the allegation.
The leak prompted three finalists, all traditional transit executives, to withdraw just as Metro was preparing to evaluate them.
Virginia, which does not think Metro’s financial condition is as dire, was “very disappointed” by the derailment, Transportation Secretary Aubrey Layne said.
While Maryland and the District want a financial expert to take the reins of the system, Virginia would be comfortable with a conventional transit executive as long as he or she focuses on safety, Layne said.
“It’s a very specialized industry,” he said. “It’s easy to cut expenses and say you’ve done something, but that’s only a short-term fix. Quite frankly, it might require more investment.”
Metro’s board will need to overcome the divisions to move forward. But lack of agreement — even within jurisdictions in some cases— has prevailed in an atmosphere of confusion, suspicion and competing politics.
Metro board members and the region’s top three transportation officials appeared to have varying degrees of awareness and opinions of the numbers, the issues and the severity of Metro’s financial problems.
Although one Maryland official, who spoke on the condition of anonymity, hinted that a financial solution for Metro could involve fare hikes and service cuts, the District’s transportation chief said that was not part of the city’s vision.
“This term ‘turnaround specialist’ can get distorted,” Dormsjo said. “Some people feel that that means a Gordon Gekko, or a corporate raider, someone who is going to dismantle
What is needed instead, he said, is “a strong CEO to pull them out and rally the region behind one of the most important public responsibilities that we have.”
Such a person does not necessarily need transit experience but must know how to rebuild an organization and shake up a culture, Dormsjo said. He suggested it needs someone like Alan Mulally, the airline executive who turned around Ford Motor, or Richard Ravitch, the New York politician who took over the city’s troubled subway system in 1979.
“I would say that there are multidisciplinary management issues at WMATA that need to be upgraded,” Dormsjo said. Metro needs to master basic management discipline, exercise better financial controls and communicate effectively with personnel — changes that would apply “across the board,” Dormsjo said.
Rahn said that the replacement last year of Metro’s chief financial officer and auditor wasn’t sufficient to guarantee good financial management going forward.
“If you leave the same people in place below them who are doing the same thing that they were doing previously, that doesn’t solve the problem,” Rahn said.
Both Dormsjo and Rahn said that continuing problems with Metro’s finances played a major role in their desire for a management overhaul.
Metro is juggling more than $500 million in short-term debt, which has accumulated largely because the federal government placed restrictions on its reimbursement process after a routine audit last year revealed serious irregularities in the agency’s fiscal management.
In the latest sign of Metro’s money woes, bond-rating agency Moody’s Investors Service downgraded some of Metro’s bonds last month.
Metro also is funding the bulk of its growing pension allowance out of its operating budget, a behavior that one Metro board member said was unsustainable and dangerous.
Dormsjo and Rahn complained that Metro hasn’t been spending all of the money it has available to buy or modernize equipment while saying it needs more money.
Last year, Metro failed to spend $207 million, or 21 percent, of its 2014 capital budget that was meant to go toward maintenance, program management and vehicles, among other projects. According to the transit authority’s latest figures, Metro had only spent about 26 percent of this year’s capital budget by the time it was midway through the fiscal year.
Metro has said that its capital spending has been slowed by its restricted access to federal funds, an explanation that Dormsjo said “doesn’t make a ton of sense.”
Morgan Dye, a Metro spokeswoman, said in an e-mail that unspent funds roll over into the next year’s projects. But she added a conciliatory comment, saying, “We recognize that there may be an opportunity to right-size our capital funding request of the jurisdictions to reflect revised spend rates, and to be mindful of current jurisdictional funding constraints.”
Metro spokesman Dan Stessel said spending has not been spread evenly throughout the year for the past several years. “The fact is that 40 percent or more of the capital budget gets expended in the fourth quarter,” he said.
More specific details on Metro’s finances were not available, because the transit agency is months overdue on its annual audit and has failed for nearly a year to provide the jurisdictions that subsidize it with full mandatory quarterly reports.
“Right now, we’re not even getting the reports that are required by our capital agreement,” Rahn said. “And we’re being told [by Metro], ‘Oh we’re trying to work on these audits, we don’t have time for these quarterly reports.’ ”
The frustrations and divergent opinions could spill into view in two weeks, when the governance committee of Metro’s board plans to hold a public conversation about the prospective general manager’s job qualifications.
Some hope the public debate will force the bickering factions to start working together. Others are worried that continued divisions, particularly after the collapse of the initial search, could keep potential candidates away.
“This is an extraordinarily small industry. And everybody watches,” said one person close to the process who asked not to be named in order to speak candidly. “They’ll say: ‘I don’t care if they promise me the world — this board is nuts.’ ”
Dormsjo said that he hopes the District will act in a mediating role between a fiscally conservative Maryland administration, which insists on postponing any discussion of expansion, and a Virginia government that is pro-expansion.
The three jurisdictions have agreed in principle to move forward with the purchase of 220 new railcars as part of a planned update to Metro’s fleet. But they differ starkly on how those railcars should be used.
Virginia wants to expand Metro service by replacing six-car trains with eight-car ones. But Maryland has been unwilling to commit the funds to do more than use new cars to replace old ones in the fleet.
Discussion of growth plans — such as expanding stations and eventually building a second tunnel under the Potomac — has been formally deferred for a year.
Dormsjo said that some accord on what kind of leader is needed could get Metro back on track.
“I think they want to see that there’s consensus at the board level,” said Dormsjo of would-be leaders. “If we can demonstrate that, I think we’ll get a very good crop of candidates.”