Metro General Manager Paul J. Wiedefeld has asked Maryland to immediately release $56 million that the state has withheld in a funding dispute, saying the transit agency is making “a good faith effort” to address the state’s complaints.

Wiedefeld also warned that Maryland’s action risked hurting Metro’s credit rating, which would increase its borrowing costs. Virginia officials and Maryland lawmakers also expressed concern that the withholding of funds would damage Metro.

But the administration of Maryland Gov. Larry Hogan (R) remains in disagreement with Metro over the issue, officials said. Transportation Secretary Pete K. Rahn has accused the transit agency of “stonewalling” on audits and failing to account for money it spends.

“We are not close to where we need to be, but we are talking,” said a Maryland official, who spoke on the condition of anonymity because the negotiations are confidential. “We are encouraged that they seem to be taking this seriously.”

The disagreement has arisen partly because of what Metro officials admit are the agency’s own past financial mistakes and of failures to provide adequate information to its three funding jurisdictions — Maryland, Virginia and the District.

Maryland withholds $55.6 million from Metro, citing ‘stonewalling’ on audits.

It also springs from tensions between Metro and its funders over how much freedom the agency should have in managing its spending.

But while all three jurisdictions would like Metro to share more information about its finances, Maryland is taking a more aggressive position than the others. Maryland said it could not release the $56 million due July 1 in part because a capital funding agreement between Metro and the three jurisdictions had expired June 30. Virginia and the District made their payments anyway, because they were satisfied that the parties were close to agreeing on a one-year extension of the agreement.

“All of us have general frustrations with Metro on transparency issues, but not to [Maryland’s] level,” said a Northern Virginia transportation official, who spoke on the condition of anonymity because the issue is politically sensitive. Another Virginia official said the dispute risked hurting regional cooperation on Metro.

Maryland’s unusual step of withholding a significant amount of money from Metro appeared to be motivated in part by Hogan’s desire to send a political message both to Metro and Maryland Democrats, analysts said.

Hogan has been one of Metro’s most high-profile critics and has complained that the state spends too much of its transportation budget on transit rather than roads. He also is locked in a political battle with some Democratic legislators and county officials from Montgomery and Prince George’s over his proposal to add toll lanes to Interstate 270, the Capital Beltway and the American Legion bridge.

Metro gets third and final ‘yes’ as Maryland commits to its full share of dedicated funding.

The Hogan administration is “a little bit mad at the D.C. suburbs, or at least the political representatives from the suburbs,” said Del. Marc A. Korman (D-Montgomery), who has played a leading role in the General Assembly on Metro issues.

Korman was one of 40 legislators who signed a letter to Rahn urging him to settle the disagreements with Metro quickly and release the $56 million in capital funds, which are earmarked to buy new trains, buses and other equipment. The letter was first reported by the political news website Maryland Matters.

“It’s going to be a downward spiral [for Metro] if the jurisdictions just start withholding money,” Korman said.

Wiedefeld, in a July 23 letter to Rahn, responded to four concerns that the transportation secretary had raised in a letter he sent when Maryland withheld the money.

The general manager said Metro would “provide more project detail” in the future, so the funding jurisdictions would know more about how the agency is spending its money.

Wiedefeld also said Metro would meet with Maryland auditors to resolve a dispute over what Metro admits was a miscalculation in a bus subsidy in 2017. The mistake led Maryland to be overcharged by $1.2 million in operating funds, and the state has withheld that money and an additional $1.2 million pending results of a 2018 audit.

Hogan calls for Metro board chairman to resign, accusing him of ‘juvenile outbursts’.

Wiedefeld said Metro was working to achieve the one-year extension of the capital funding agreement. That has been delayed by a dispute, mainly between Maryland and Metro, over how much freedom Wiedefeld should have in reprogramming capital spending, officials said.

In what Maryland viewed as a concession, Wiedefeld said Metro is open to negotiating a separate, formal agreement with Maryland for dedicated funding approved last year.

In a historic move, the three jurisdictions agreed to provide Metro with an additional $500 million a year in dedicated funding.

Virginia has already signed an agreement with Metro regarding its contributions under that plan, and the District is negotiating a similar deal. Wiedefeld said such an accord has not been negotiated with Maryland because Metro has not received “an official request for one.”

After warning that Maryland’s withholding of funds could hurt Metro’s bond rating, Wiedefeld concluded his letter to Rahn by saying, “Given these considerations and the good faith effort by [Metro] to address the issues raised in your letter, I request that the [Maryland Department of Transportation] immediately . . . authorize payment of the withheld capital funds.”

In a related development, the District said it is insisting that Metro formally commit in the dedicated funding agreement that new money to be provided would be spent for safety and reliability. The city does not want the money spent to expand the system, such as by building a second train tunnel under the Potomac for the Orange, Blue and Silver lines.

“We want to make sure this additional money is going to the things we approved it for,” D.C. Chief Financial Officer Jeffrey S. DeWitt said. “We want [Metro] to get the house repaired, not add another room.”