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Metro looks ahead 10 years while states consider funding increase

The transit agency announced a plan to build housing and commercial space on 20 properties it owns

Riders watch as a train pulls into the Metro Center station in Washington. (Bill O'Leary/The Washington Post)
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Metro announced an ambitious 10-year plan Thursday to build housing and commercial space on 20 properties it owns, which the transit agency projects will bring thousands of customers and millions of dollars in rent and fares as it diversifies income streams for the lean years ahead.

The prospect of looming financial trouble from the loss of fare-paying commuters to telework and an overextended construction budget has also prompted Maryland lawmakers to propose increasing annual subsidies under a plan contingent on Virginia doing the same.

Metro is hoping to soften a financial blow it expects next summer, when more than $2 billion of federal coronavirus aid begins to evaporate. The proposals are the latest ideas from transit officials and lawmakers as the region recovers from a pandemic that has altered commutes and crushed Metro’s finances.

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“As we emerge from the pandemic, joint development presents a real win-win opportunity for Metro and the region,” Liz Price, Metro’s vice president for real estate, said in a statement.

As land prices escalate across a region in need of more housing, developers have increasingly tried to partner with Metro, owner of more than 550 buildable acres near 40 rail stations. The locations are coveted among developers because of their transit access, which tends to command higher prices. Since 1975, Metro has built 55 projects and 17 million square feet at 30 stations through public-private development agreements. Those projects generate $194 million annually in state and local tax revenue.

Transit officials said that for the first time, the agency has a detailed plan to develop Metro’s remaining properties and aims to coordinate with local governments to create development that benefits the transit system.

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The plan’s goals are to increase Metro ridership, generate new revenue from fares and leases, and help the region grow businesses and housing that generate tax revenue. The increased development would ultimately help Metro in the form of annual subsidies that jurisdictions provide.

Metro’s remaining buildable property includes land at or around 40 stations with the potential for 31 million square feet of development and 26,000 homes. More than half of the sites are in Maryland, six are in Northern Virginia and the others are in the District.

Angie Rogers, deputy chief administrative officer for the Prince George’s Economic Development Corporation, said her office is working on plans to increase development along the Blue Line corridor from D.C. to downtown Largo. It’s also teaming with Metro to preserve and expand housing, commercial stores and offices at Blue, Orange and Green Line stations.

“Prince George’s County’s economic development platform has a key goal of capitalizing on transit oriented developments (TOD) within the Beltway. In addition to facilitating access for our residents, workers, and visitors, TOD opportunities help generate transformative opportunities that help diversify our tax base,” Rogers said in a statement. “We look forward to our continued collaborations with [Metro] on these exciting efforts.”

New transit users from the proposed developments in Metro’s plan are projected to take 5 million to 9 million new Metro trips each year and pay $20 million to $40 million in fares, according to Metro estimates.

Revenue from leases would generate $50 million for Metro each year, and the development would contribute about $340 million in annual tax revenue to local and state jurisdictions, Metro said.

The influx of revenue, while still years away, would bring more balance to Metro’s income sources. The transit system’s biggest moneymaker, Metrorail, lost about 80 percent of its riders during the pandemic, although ridership has rebounded recently alongside the reopening of more downtown office buildings. Daily weekday rail trips last week were still 65 percent lower, on average, than before the pandemic.

Congress saved Metro from drastic service cuts over the past two years with three rounds of federal stimulus money, an infusion of $2.4 billion that made up for revenue losses. Metro, with an annual operating budget of about $2 billion, is projecting to have $151 million of federal aid remaining for the fiscal year that begins July 1, 2023, leaving the agency to make up the rest.

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The transit system is projecting a funding gap in mid-2023 of more than $300 million.

Metro also faces a looming deficit in its capital budget, which funds construction, renovation projects, new trains and buses. The transit system for years had been behind on repairs and upgrades, contributing to track fires, breakdowns and delays, but that had started to change in recent years, boosted by Maryland, D.C. and Virginia deciding in 2018 to devote dedicated funding for Metro’s needs, amounting to $500 million annually.

The money helped Metro catch up on repairs, including the replacement of 20 worn and weathered outdoor platforms and an overhaul of station escalators. The dearth of passengers during the pandemic also allowed Metro to expedite projects. Metro’s annual capital building program over 10 years has grown from $700 million a year to more than $1.8 billion this year.

The transit system issues bonds to get money upfront, using the dedicated revenue from jurisdictions to pay for them.

Next year, the transit system’s proposed capital budget is $2.4 billion, which is funded using the same bond method. But in a few years, the transit system won’t be able to issue new bonds because its dedicated funding will only be enough to pay back outstanding bonds.

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Aware of Metro’s funding shortfall, elected leaders across the region — assisted by the Metropolitan Washington Council of Governments — have been discussing funding increases.

Last month, the Maryland legislature passed a provision that would automatically increase the state’s annual funding to Metro by 3 percent, contingent upon Virginia doing the same. D.C. has already committed to the increase, officials in Maryland and Virginia said. D.C. Council Chairman Phil Mendelson (D-At Large) did not respond to a request for comment.

Del. Marc A. Korman (D-Montgomery), who sponsored the Maryland House’s version of the bill, said the measure would allow Metro to use bonds for capital projects well into the future.

“The purpose of the bill was to have that dedicated funding grow so [Metro] could continue bonding off of it long term,” said Korman, the chairman of Maryland’s House Appropriations subcommittee on transportation and the environment.

The Maryland Senate and House versions of the bill are in a committee where lawmakers are resolving differences between the two versions for a final product to be passed and sent to Gov. Larry Hogan (R) for his signature.

The bill is supported by the Washington Suburban Transit Commission, which represents Prince George’s and Montgomery counties.

“Without adequate funding, [Metro] will not be able to close out its backlog of projects, much less make the improvements being requested by riders and jurisdictions across the national capital region,” the commission wrote in a letter of support to the committee last month.

Metro spokeswoman Sherri Ly said in a statement that transit officials “appreciate efforts in Annapolis to advance this regional collaboration.”

Virginia has not tried to pass a similar bill. Sen. George L. Barker (D-Fairfax), who is leading the state’s effort, said he wants to build support for any proposal with the administration of Gov. Glenn Youngkin (R), who took office less than two months before Virginia’s legislative session ended.

“There was no time to really work with the new secretary of transportation,” Barker said. “So I’ll work on that next year.”

A 3 percent annual increase in the dedicated Metro funding would generate an additional bondable $15 million in its first year, $30 million in the second year and $46 million in the third year. That amount is still a fraction of what Metro’s capital needs will be, according to the Washington Suburban Transit Commission.

D.C., Maryland and Virginia already provide annual funding that supports Metro’s operations, although that money cannot be used for capital projects.