D.C. Transit Authority Mulls Finance Challenges

A plan released by the Washington Metropolitan Area Transit Authority details $6 billion of investment the nation's second-busiest subway system and the city buses need to make over the next 12 years, and calls for new revenue to support it.

Titled "Momentum," the long-range strategic plan makes the case for the Metro system's crucial role in the metropolitan area around the nation's capital, identifies several crucial and necessary investments the authority says it needs to make and says the system must secure reliable funding amidst great uncertainty.

"Without an eye to the future of the Metro system and how it might keep up with continued strong growth in the metropolitan area, the region's competitiveness itself may be at stake," the document declares. "Certainly, Metro must not only continue the system rehabilitation that is currently underway, but also anticipate future growth to ensure that the region remains livable and advance its competitiveness."

Ridership on Metrorail has grown from just over 100,000 daily in the late 1970s to about 750,000 today, according to WMATA statistics. Metro operates the second-largest heavy rail transit system and the sixth-largest bus network in the U.S.

"The challenge for Metro is how to adapt and adjust to a region that is growing rapidly, adding development at or near Metro station areas, and using a system that was conceived more than four decades ago at an increasing rate," according to the document.

The plan argues that a robust transit network is crucial to the district's financial health. Property in the vicinity of Metro stops is worth much more than it otherwise would be and brings in more property taxes, an important revenue stream for the district's general obligation bonds.

"Proximity attracts residential, commercial, and retail development and enables people to access homes, jobs, shopping by transit, foot, or bike, reducing auto-oriented infrastructure (e.g. parking) and allowing that land to be used for the highest and best use," the WMATA plan states.

Major projects envisioned for the coming decade include $2 billion of improvements to allow longer trains at every station, $600 million to add bus-only lanes to speed service, $1 billion for underground passenger tunnels between transfer stations, and another $1 billion for track work near the Pentagon.

But paying for these investments could be problematic, as Metro faces major challenges in ensuring a predictable funding stream that could be used for either pay-as-you-go maintenance or bond financing. WMATA has gone to market for major investments in the past, most recently selling nearly $300 million in A-rated bonds in 2009.

While most other major metropolitan transit networks are able to finance capital spending with predictable revenue streams generated by local taxes or fees, Metro relies on federal appropriations matched by local and state governments in the district, Maryland, and Virginia.

"Gas tax revenues, which are often used as the source of these dollars at the state and federal level, have not kept pace with inflation, while policy makers have entertained few new funding options," Metro's plan states. "In addition, some policymakers are increasingly averse to strong federal infrastructure spending, with some policymakers even pushing the federal government to 'devolve' the federal role in transportation and exit the funding business altogether."

That trend was epitomized during congressional debate over the surface transportation funding bill last year. Republicans proposed to eliminate dedicated federal funds for mass transit. The proposal did not survive a House-Senate conference committee and transit advocates remained unsatisfied when the approved bill did no more than preserve funding at the existing levels.

The solution for WMATA might lie in copying the models used in cities like New York, Boston, Philadelphia, and Los Angeles, the plan concludes.

"Metro and it stakeholders have many options for discussion including regionalized versions of a commercial real estate tax, a sales tax, a gas tax, a mortgage recording tax, and a payroll tax," it states. "Other mechanisms could include a congestion pricing program or a dedicated percentage of fees from the region's jurisdictional partners."

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