The Washington PostDemocracy Dies in Darkness

Metro GM proposes ‘new business model’ and $500 million a year in extra funding to save D.C.-area transit agency

Metro General Manager Paul J. Wiedefeld discusses the Safe Track program at the East Falls Church Metro Station in Falls Church, Va., on June 3, 2016. (Marvin Joseph/The Washington Post)

Metro General Manager Paul J. Wiedefeld plunged into the high-stakes debate over how to save the troubled transit agency Wednesday by proposing far-reaching changes to extract major concessions from labor unions and seek new, dedicated funds from local governments to provide $500 million a year for equipment and maintenance.

Wiedefeld said Metro needs $15.5 billion over the next 10 years for investments to “remain safe and reliable,” an average increase of nearly 30 percent over the agency’s previous request. He also said the agency needs to rein in labor costs to help avoid a budget crisis. He urged making pension benefits less generous for future hires and amending a federal law to strengthen management’s hand in arbitration of contract disputes.

The agency also should be free to outsource operations and facilities, such as for the second phase of the Silver Line. Metro employees would compete with contractors for some work.

“I don’t have a backup plan to solve this, because I don’t know where else I can go,” Wiedefeld said. Metro “must change its business model, as operating expenses are growing at nearly twice the rate of revenues,” he said.

But Wiedefeld stopped short of calling for an end to mandatory binding arbitration of labor disagreements, as Republican lawmakers and some business groups have urged.

Wiedefeld's initiative, described in documents and a meeting with Washington Post editors and reporters, instantly became the centerpiece for current discussions in the District, Maryland, Virginia and Congress over Metro's future.

This is the first time Wiedefeld has offered a comprehensive plan to address Metro’s long-standing problems with funding and what he called the agency’s unsustainable cost structure.

Wiedefeld's opinion is likely to carry influence because he has earned the respect of many elected officials, business groups and transit advocates for his willingness to make tough decisions, such as his unprecedented one-day emergency shutdown of the system last year over safety concerns.

Taken together, the elements of the plan represent a kind of grand trade-off, in which a tougher stance on labor relations could help persuade politicians and the public that Metro is operating as efficiently as possible and thus deserves half-billion dollars a year in extra funding.

Sen. Tim Kaine (D-Va.) lauded Wiedefeld’s plan, saying it is one of several proposals that should be considered as the region works to turn Metro around.

“Paul Wiedefeld has started to turn the troubled ship that is Metro, and his logical proposal for a long-term funding plan is worthy of careful consideration,” Kaine said in a statement. He said he was “open to any solutions that meet the main criteria of ensuring a reliable funding source and making positive changes to safety and governance.”

But Rep. Barbara Comstock (R-Va.) complained that her office had not been adequately briefed.

“We were provided only a minimal heads-up but no paper or details on the proposed reforms and how they would reduce costs or improve safety. Essentially all we received for details at this time was a huge price tag,” Comstock said in a statement.

While Wiedefeld’s proposal advocates for dedicated funding for the transit agency, he does not take a position on what form it should take. He also does not recommend rewriting the Metro Compact, which dictates how the agency is governed and funded, and which many critics say is a roadblock to real reform.

But many of the proposals Wiedefeld does make will face enormous hurdles. While the Metro board could okay some of the measures, the additional funding will require approval by state legislatures in Richmond and Annapolis, the District government and suburban counties and municipalities served by Metro.

“Clearly, what I’m trying to do here is thread a needle,” Wiedefeld said. “We have lots of different interests, whether it’s Richmond, whether it’s Annapolis, whether it’s the District, whether it’s Fairfax County. Everyone has their own pressures that they’re under.”

In addition to the labor provisions and new funding, Wiedefeld proposes a $26 million annual “rainy day fund” to pay for snowstorms and other emergencies. Growth in annual subsidies to Metro from the jurisdictions would be capped at 3 percent, once the new capital fund and emergency fund were created. The proposal also eliminates high-cost bus routes that serve few riders and opens the possibility that local jurisdictions would have to take over costly paratransit services.

Wiedefeld said extension of the federal program that supplies $150 million a year to Metro for equipment and maintenance is critical. The program is scheduled to expire in two years, and Republicans in control of Congress have indicated they want to see concessions on labor practices before continuing the program.

Since taking over Metro in November 2015, Wiedefeld has focused on resolving urgent, short-term safety and maintenance troubles, and on the difficult task of cutting a deal to balance next year’s budget.

Wiedefeld said he was surprised at the depth of Metro’s problems when he took over. He said that Metro was always viewed as “the gold standard” of transit systems in the industry and that he assumed when he arrived that it would at least be “a really good bronze or silver.”

Instead, he said, it was whatever is “below bronze,” “across the board.”

Wiedefeld is speaking out as the debate over Metro reforms and funding enters a critical phase. Virginia Gov. Terry McAuliffe (D) recently tapped former U.S. transportation secretary Ray LaHood to head a study of Metro’s problems and make long-term recommendations.

The plan is that the LaHood panel will lead to the drafting of bills in Virginia and Maryland in early 2018 to enable counties and municipalities in the D.C. suburbs to raise taxes to support Metro.

Wiedefeld declined to say what kind of taxes he thought the region should adopt to create the capital fund needed to generate $500 million a year. That’s something for the public and elected officials to decide, he said.

Two proposals that have been floated are a 1-cent regional sales tax, which would generate about $500 million a year, and a tax on property close to Metro stations.

Instead, Wiedefeld emphasized that the extra money is needed to buy rail cars and buses, and catch up on overdue maintenance. Otherwise, he said, Metro would lose ground on safety and reliability, inevitably leading to a decline in ridership.

With a system that is “now more than 40 years old, customers are feeling the effects of an aging system that is jeopardized by decades of deferred maintenance,” he said.

He said it was vital that the money come from “a multiyear, stable revenue source,” which would enable Metro to leverage the funds by floating bonds. Metro is the only major transit system in the nation that does not have a significant dedicated funding source that allows it to tap the capital markets in that way.

Asked whether he would resign if he does not get the support he seeks, Wiedefeld said he would step down if there was not enough money to guarantee safety.

“I’m not going to back off what we need to do on the safety side,” he said.

The new plan offered the first look at Wiedefeld’s views on how to deal with labor costs, which account for more than two-thirds of Metro’s expenses.

He said he would preserve Metro's existing pension commitments to current employees and retirees, but would save money by providing 401(k) retirement plans for all new hires. The 401(k) plans are less costly to Metro than the existing plan, which provides a guaranteed level of benefits.

He also proposed to amend a 1995 law — sponsored by former U.S. representative Frank R. Wolf (R-Va.) that governs arbitration of labor disputes.

Critics say Metro’s labor costs are too high because arbiters tend to favor unions in disputes over wage and benefits contracts.

Wiedefeld favors revising the National Capital Area Interest Arbitration Standards Act to require that the arbiters make decisions that are consistent with Metro’s financial condition. Arbiters also could not make awards that “exceed the ability or willingness of the funding jurisdictions to pay,” Wiedefeld said.

Finally, Wiedefeld said he would curb costs by opening to competition functions that Metro can outsource. This would be positions such as station managers and track inspectors on the section of the Silver Line slated to open in 2020, but not train operators he said.

Faiz Siddiqui contributed to this report.