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WMATA’s Stagnant Revenues Means The Locals Have To Pick Up The Slack

A pessimistic budget was released by Washington Metropolitan Area Transit Authority Monday (WMATA), predicting that Metrorail’s  ridership would not increase from July 2015 to July 2016. This stagnation would require local governments in the District, Maryland and Virginia to contribute more money in order to make up the difference and subsidize the system, according to The Washington Post.

As this revenue stagnates, Metro would simultaneously be staring down an increase in day-to-day costs of operations. Together, the two factors would necessitate a total of $898 million in subsidies from local governments, an 18 percent increase from current subsidy totals of $758 million.

The new WMATA Metro budget won’t be formulated until early in 2015; this fiscal year’s budget is for $3 billion, including operational costs and large expenditures. In addition, fares from bus use and MetroAccess are projected to increase in the coming fiscal year, although not enough to offset the projected stagnation in rail fares. The Post says that revenues will drop 1 percent, $13 million, in the next fiscal year.

The increases in subsidies will primarily be necessitated by a $100 million spike in day-to-day operational costs, caused by “inflation, contracted pay raises for unionized workers and other factors” according to the Post.

Metro has already has already hiked fares this fiscal year; the precedent is that Metro does not raise fares in consecutive years. If the precedent holds, riders, already disgruntled about what they see as rising costs for a lesser product, shouldn’t have to shoulder more costs in the next fiscal year.

Although it is tempting to blame this stagnation in ridership on the constant delays, malfunctions and frustrations one experiences with WMATA, the Post says that the issue is actually related to federal regulations regarding employers contributing to their employees’ commuting expenses.

The Post writes “In 2013, under Internal Revenue Service rules, companies were allowed to set aside as much as $245 monthly from an employee’s pay, before taxes, if the worker wanted to use it for transit fares or parking. The parking allowance is now $250. But the fare benefit has dropped to $130 amid disputes on Capitol Hill over tax reform.

The federal government gives workers a direct payment to cover commuting costs instead of taking it from their pay. Metro riders who receive that direct benefit have felt the worst pain, dollar-wise, with the maximum monthly allowance now reduced to $130.”

These subsidies of parking and the rise of fare costs gives commuters incentives to drive rather than use public transportation like the Metrorail system. Traditionally, these rail revenues have helped combat inflation and other sources of cost for the Metro system, and without a rise in revenues, these cost drivers will continue to compound operational costs.

In a statement to the Washington Post, Metro’s CFO Dennis Anosike said “The decrease in the transit tax benefit has penalized a broad cross-section of Metro riders — both private-sector workers and federal employees alike. There’s no doubt that some commuters traveling longer distances are now finding it more affordable to drive than ride, and that needs to change.”

Other costs may also be added by current deliberations over a deal to buy a new 7000 series of railcars from Kawasaki. Metro has ordered 528 of these cars, and has options to buy 220 more from Kawasaki. Having 728 cars and upgrading infrastructure to accommodate them would allow WMATA to reach the goal of easing congestion through the sole use of eight-car trains (eliminating the six-car train) during morning and evening rush. The extra 220 car purchase and upgrades would require a $1.4 billion subsidy from local governments in Maryland, Virginia and the District.

Whether or not stagnation is caused by federal regulation or by, as disgruntled commuters across Twitter suggest, bad service, it will create complications not only for WMATA but for the governments involved in paying for that agency’s operations.

Featured image from Shutterstock

Brad Matthews

Brad Matthews is the Digital Content Coordinator intern for Watchdog Wire. Twitter is @bradmatthewsDC

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Categories: Budget and Finance, Must Read, Taxes, Transportation

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