Weeks after a federal bailout helped Metro veer away from a fiscal crisis, the transit agency plans to borrow $360 million through bond sales to expedite construction projects officials say will make the system safer.
Metro said the sale of bonds will be backed by annual dedicated funding that Maryland, Virginia and D.C. approved in 2018 for capital projects. Those projects include platform reconstructions, bridge replacements, drainage improvements and other infrastructure needs as part of a $5 billion backlog.
The goal, Metro staff said in a proposal that board members will review Thursday, is to “improve system safety, state of good repair and reliability” while also rehabilitating and modernizing the rail system. The board’s finance committee will vote Thursday on whether to send the measure to the full board.
If board members approve the bond sale, it would be the second time the agency has sold bonds in eight months to pay upfront for projects. The projects Metro is targeting this time around are a sliver of a nearly $23 billion budget for capital projects that stretches 10 years. Metro’s first bond sale advanced with little discussion.
Metro is also paying for an expensive platform reconstruction project the transit agency accelerated last year because of lower ridership during the pandemic.
With ridership at historic lows, Metro’s operating budget is projected to lose about $550 million in revenue this year, while the transit agency has shelled out tens of millions of dollars for personal protective equipment, disinfecting and cleaning supplies and services. The agency has been surviving off federal Cares Act money that Congress passed in April, but the $767 million was set to run out early this year.
Unsure whether Metro would get another stimulus, board members planned for the worst, proposing a budget for fiscal 2022 that included buying out or laying off a fourth of Metro’s workforce, closing 19 stations and eliminating weekend rail service.
The economic stimulus that Congress passed in December included $610 million for Metro, but transit officials say they expect to need at least one more federal boost late this year to make a final hurdle toward recovery.
While Metro’s operating budget is surviving on temporary stimulus funding, its capital budget is more stable, funded by the federal government, Maryland, Virginia and the District. After years of asking each jurisdiction for annual capital funding, state and D.C. lawmakers began dedicating a portion of their budgets to Metro’s capital needs.
The steady source allows Metro to sell bonds, get large sums of money upfront for projects and pay back the bonds with the dedicated subsidy streams.
“The plan has been, since we got the dedicated funding approved, to use borrowing as a way to make some of these capital investments sooner than we otherwise would have been able to,” said Steve McMillin, a Metro board member who chairs the board’s finance committee.
In June 2020, Metro sold $545 million worth of bonds to help pay for capital projects that included a $431 million multiyear station platform replacement project. The project, replacing deteriorating platforms at 20 stations, is more than halfway complete.
Because of low usage due to the pandemic, Metro pushed up the timeline of the project, closing stations west of Ballston on the Orange Line between Memorial and Labor Day weekends to replace five platforms months earlier than scheduled. Expediting the work requires Metro to increase its capital budget this fiscal year by $255 million.
McMillin said fast-tracking the platform project did not raise the project’s overall budget.
“The budget amendment and the impact that has on this year’s borrowing amount is a reflection of accelerating the timeline primarily on the platforms,” he said. “The scope and cost of the project is still within what we anticipated when we approved it.”
The additional $360 million Metro is seeking from bond sales would be paid back over 25 years and help fund the agency’s next series of rail cars, the rehabilitation of rail cars, power and communications improvements, tunnel and drainage work, canopy replacements and other projects.
The projects are to return the agency to what Metro officials call a state of “good repair.” Transit officials believe they are about $5 billion in work behind where Metro should be in repairs, upgrades and replacements since the agency began prioritizing safety over performance about six years ago.
“Now that we’ve gotten ourselves organized to attack the capital backlog and take on some of these big projects, [issuing bonds] is the borrowing authority associated with dedicated funding to work on those big projects, get the backlog down in a prompt and responsible manner,” McMillin said.
Some members of Congress are also seeking to give Metro a boost toward that goal.
Last week, members of the Washington region’s congressional delegation said they plan to ask Congress to increase the amount of capital project money Metro receives from $150 million a year to $200 million a year, gradually over 10 years. Rep. Gerald E. Connolly (D-Va.) is sponsoring the proposal through the Metro Accountability and Investment Act, which would provide the agency with more than $1.7 billion between 2022 and 2031.
On Wednesday, the Metropolitan Washington Council of Governments sent a letter to Congress, urging lawmakers to pass even more — at least $2 billion over 10 years — for Metro capital needs.
“Federal funding — together with the region’s commitment — will support the major maintenance and capital rehabilitation activities that are necessary to restore and improve the aging transit system,” the letter said.
Correction: An earlier version of this story, and its headline, incorrectly said that Metro was seeking to raise $350 million in bond sales. The correct amount is $360 million. This story has been updated.