Danger: Higher Local Taxes Ahead
Washington Metro & NYC Subway on Collision Courses
by Thomas Lambert Cranmer, 11/21/2017
Politicians have ducked and run from recommending what to do with the D.C. Metro and N.Y. subway disastrous conditions. The New York Times (NYT) just exposed the neglect in a major front page article called "The Making of a Meltdown"[1]. The subtitle was "How Politics and Bad Decisions Plunged New York's Subways into Misery". The NYT described how the rails, controls and cars are falling apart due to inadequate funding, but did not propose what actions should be taken, how much money should be provided and by whom.
According to CNN Money, regarding the Metropolitan Transportation Authority (MTA) that manages the NY subway and tolls:
"About $500 million per year from [New York Mayor] de Blasio's proposed tax increase would go toward signal improvements, new cars and track work. About $250 million would pay for half-priced transit cards for people who can't afford the full cost, about $121 per month."[2]
Governor Cuomo of NY did not propose a total amount needed per year, but declared a state of emergency on June 29, 2017:
"by virtue of the authority vested in me by ... the Executive Law to temporarily suspend specific provisions of any statue, local law, ... of any agency during a State emergency, if compliance with such provisions would prevent, hinder or delay action necessary to cope with the disaster, hereby declare a State-wide disaster emergency and temporarily suspend, for the period from the date of this Executive Order until further notice ..."[3]
The declaration listed 13 applicable laws that are suspended. No amount of extra funding was provided in the Executive Order.
VA Governor McAuliffe hired ex-President Obama's former Transportation Secretary Ray LaHood eight months ago to write a major report on what should be done with the Metro. LaHood's final letter of only five pages[4] came out at the end of October 2017. He said an additional $500 million each year is needed[5], but did not explain how he calculated the amount or recommend from whom the money should come. What a coincidence that NY and D.C. politicians want exactly $500 million more for their transit systems.
The most obvious potential source of funding, the riders, was ignored in both reports. The NYT described how in the past fares were raised in New York:
"Budget shortfalls have led transit leaders to routinely raise fares to stay afloat. The subway now derives more than sixty percent of its funding from fares, a higher rate than almost any other transit system in North America."[6]
MTA's proposed budget for 2018 showed fares and tolls at 51% of total revenues and included 2% annual fare increases.[7]
LaHood does not present figures on how much of costs are recovered by fares. Instead he and his consultant, WSB, tried to make the case that Metro is close to "average fare box recovery" for bus and rail.[8] He did not present any financial data from the Washington Metropolitan Area Transit Authority (WMATA)'s annual report or the MTA. WMATA is the corporate owner of the Metro.
WMATA's annual report for the year ended June 30, 2017 showed "passenger revenue" as 28% of total revenue.[9] Metro's passengers contributed half the revenue percentage the NY subway passengers did. Thus, it is reasonable to expect Metro's users to double their payments, in line with the slogan "let the user pay". Many Federal workers receive a transit subsidy of up to $255 per month. "In April 2000, Executive Order 13150 mandated that all Federal agencies in the National Capital Region (NCR) implement a Transportation Subsidy Program by October 1, 2000."[10]
LaHood did not mention that when the Metro was planned it was expected fares would cover all the operating costs and 80% of the capital costs.[11]
In general LaHood padded the report with charts on how Metro compares to other transit systems in the US. He subcontracted the report to a "global engineering firm WSP".[12] WSP wrote the report attached to LaHood's letter, but did not recommend how the system should be financed. The report comments:
"Within WMATA's capital budget, spending has already risen, but it must rise even further to achieve a state of good repair. This will not be possible without a substantial increase in the level of support provided to WMATA."[13]
WMATA received $942 million in cash for capital contributions in 2016.[14] LaHood recommended on page four of his letter $500 million more should be paid in as reported above. This means the counties should increase their contributions by 54% ($500 million divided by $930 million). Fairfax County's "Projected operating and capital requirements for the County's FY 2018 Metro subsidy totals $178,600,000"[15], or $649 for a family of four in a county of 1.1 million.[16] If the counties have to bear the proportional burden on increased annual payments, the annual tax increase would be $96 million dollars -- equal to an increase of $349 for a family of four, totaling $1,000 per year for a family to subsidize Metro riders.
Metro's estimate of the Fairfax County increased contribution is $25 million in FY 2019,[17] rather than the $96 million per year. LaHood made no attempt to reconcile these figures.
The NYT reported that on November 21, 2017 the Toronto transit system head, Andrew Byford, will be in charge of the New York subways and buses.[18] He will take months to assess the amount of money required and from what entities. Governor Cuomo has proposed a congestion pricing system, but "Months have gone by without his offering any details."[19]
At least Metro is specific with a ten-year plan proposed:
- Invest $15.5 billion over next 10 years for critical capital projects, increasing average annual investment to $1.5 billion;
- Establish a multi-year, inflation-adjusted stable revenue source generating $500 million per year to a Capital Trust Fund;
- Dedicate the Capital Trust Fund exclusively to capital investment, not day-to-day operations;
- Secure Congressional reauthorization for federal capital investment (PRIIA) at least at current level of $1.5 billion over 10 years;
- Cap annual jurisdictional capital contribution growth at 3 percent;
- Cap annual jurisdictional operating contribution growth at 3 percent;
- Support flexibility to reduce cost through innovation and competitive contracting, where effective;
- Amend the National Capital Area Interest Arbitration Standards Act (Wolf Act) to require consideration of WMATA’s financial condition;
- Initiate new retirement program for new hires;
- Create a Rainy-Day Fund to mitigate unforeseen obligations.[20]
None of the projections for the Subway or Metro costs show any cost/benefit or cost effectiveness ratio analysis. No alternatives are shown. It is more a case of politicians saying: "we want it", like children do.
"The Federal Transit Administration allowed Maryland to violate FTA rules by ignoring delays to auto travelers when calculating the cost-effectiveness of the Purple Line."[21] I pointed out to the VA transit authorities that building the Silver Line violated the VA guidelines for the population density required. The density was half the guideline level needed to build an economic transit system. The VA authorities said: "It was only just a guideline."
A major problem Metro politicians do not want to highlight is the tunnel bottleneck between VA and D.C. The tunnel cannot carry any more people at rush hour than before the Silver Line was built and now. More money for the Metro as projected will not solve this problem.
One of many alternatives is to use double-decker busses, that are more than twice as efficient in carrying passengers, rather than transit that is competing with highways. Double-decker buses can carry 132,000 people per hour, compared to 24,000 to 49,500 by high-capacity rail.[22]
Loudoun County has been successful in attracting bus riders for long distance commuting. Surveys of riders indicated they are willing to pay full costs of the bus service. Loudoun asked the Metropolitan Washington Airport Authority (MWAA) to permit buses to go on the Dulles Airport Access Road.[23] Permission was not given.
Telecommuting is a much more attractive alternative to taking transit. People are finding Uber and similar taxi and ride-sharing services more acceptable than driving to a crowded garage, paying for parking and then walking in unpleasant weather to an unreliable transit.
It is good that politicians are staying silent and taking no actions to provide the funding. This way the Metro will continue to fall apart, and riders will continue to find other means of transportation. Total annual ridership has declined in millions of passenger trips -- from 418 in 2012 to 379 in 2016, a decrease of 39%.[24]
A major change coming is the more widespread use of automobiles that are equipped with sensors that allow them to follow more closely, possibly doubling the traffic that can go on roads safely.
Randal O'Toole, a famous transit analyst, makes a persuasive case that since major changes are coming in telecommuting, use of long distance double-decker buses and safer technology in cars, transit will be obsolete by 2025.[25] Throwing money at transit is an expensive waste. Transit should be allowed to die a natural death, encouraging different and less expensive lifestyles with lower taxes.
If the politicians want to make hard decisions without blame or throwing money at Metro and the Subway, WMATA and the MTA should declare bankruptcy. This will allow independent bankruptcy judges to put in reforms required for competitive procurement, reasonable wages, impartial procurement contracts, arbitration to consider the transit financial condition and modern pensions. The judges could appoint new boards of directors with experts, rather than conflicted politicians.
Mr. Cranmer is a fellow at the American Center for Democracy and First V.P. at the Fairfax County Taxpayers Alliance. He has a B.A. from Yale and M.B.A from Columbia. A transportation expert, he has testified at many hearings and writes frequently on political and technological subjects. He has worked in and analyzed projects in most countries of the world.
1. New York Times, November 19, p.1
2. CNN Money by Jill Disis, August 7, 2017
3. Executive Order No. 168 on June 29, 2017 declaring a "disaster emergency" in the region the Metropolitan Transit Authority serves.
4. Five-page letter from LaHood to Governor Terence R. McAuliffe dated October 23, 2017 with a 19-page report by WSB attached.
7. MTA Proposed 2018 budget pie chart, p.13
9. WMATA annual report (CAFR) for 2017 p.9
10. https://www.doi.gov/ofas/support_services/transportation_subsidy_program_faqs#Answer1
11. Zachary N. Schrag. The Great Society Subway: A History of the Washington Metro. Johns Hopkins University Press, 2006. Pp.53-54
12. Op cit. McAuliffe's letter, p.1
15. Fairfax County 2018 budget Fund 3000
16. https://suburbanstats.org/population/virginia/how-many-people-live-in-fairfax-county
17. Metro Finance Committee Information Item IV-B November 2, 2017 "GM/CEO FY 2019 Proposed Budget" pp 40 & 44
18. NYT Opinion, November 22, 2017 p.A24
20. Op cit. Metro Finance Committee, p.3
21. "Paint is cheaper than Rails", by Randal O'Toole. Cato. June 19, 2013. Data from National Transit Database, p.3
23. Silver Line hearings, 2013
24. Op cit. WMATA report p.106
25. Personal communication with Mr. O'Toole