Why is WMATA’s budget always short?

Metro’s preliminary shortfall for the FY 2013 budget year, which begins July 2012, is $121 million and is similar to previous deficits. But, why does Metro’s budget always end up in a shortfall this time of year?

Essentially, WMATA must take into account mandatory increases in current service expenses as well as the proposed costs of recommended improvements, while not being able to count on any increases in revenues.

Expenses

Most of WMATA’s expenses cover the wages and salaries of employees who drive trains and buses, supervise stations, work on tracks, etc. Many of WMATA’s employees are union represented, and their wages increase from time to time according to the labor agreement. Additionally, most employees are supported by health insurance and a pension system, and the rates all increased this year.

Revenues

Since Metro’s ridership is in a slow decline due in part to both high fares and a weak economy, it can’t count on increases in fare revenue (without raising fares) to help balance the budget. Additionally, WMATA can’t assume that local jurisdictions will increase their contributions, so the budget process presumes the same support as last year.

In combination, this expense and revenue mix almost guarantees that WMATA will report a deficit to start out the new fiscal year. This coming year’s reported deficit is different, because nearly half of the shortfall is considered discretionary.

Carol Kissal, WMATA Chief Finance Officer, made that point last Thursday, and suggested that the board develop a fare increase to cover the higher costs of existing service, while the jurisdictions should be expected to provide funding for various initiatives meant to improve service.

WMATA proposed various service improvements:

More police on buses

The bus system has experienced some high-profile shootings recently, and the system also has some issues with fare evasion and driver assaults. For $2 million per year, the agency could provide an additional 32 police officers for its buses. This might improve rates of fare evasion and encourage people to ride the bus if crimes and assaults decrease.

Preventive maintenance for escalators and elevators

Earlier in the year, Metro stated that it doesn’t have the staff available to complete all preventive maintenance items on time. $8 million per year would increase the number of maintenance staff and improve elevator and escalator availability.

Bus priority corridors

For $5 million, Metro can provide additional buses and supervision on key routes, which would alleviate crowding and improve service. WMATA said this initiative would require some capital improvement as well as coordination with the local jurisdictions.

Maintenance of capital investments

An increase of $2.5 million is needed for ongoing maintenance of capital assets.

Increase staff to reduce overtime

This would cost $11.2 million per year, but might improve safety since fewer fatigued workers would be on the job. Additionally, more alert workers would make fewer mistakes, leading to less rework to fix problems.

Engineering maintenance

$1.9 million is needed to increase maintenance performed on the fleet of buses and trains.

Rail grinding

Worn-out rails have speed restrictions and increase the likelihood of wheel or rail failures. An additional $2.7 million would improve fleet reliability and on-time performance.

Radio maintenance

Metro has had some public failures of its radio system, and $1.4 million is needed to improve the radio reception throughout the system.

All of these choices are improvements compared to the baseline service Metro offers today, so $55 million of the $121 million shortfall shouldn’t factor in as a “deficit,” but rather as the cost of improvements that staff are looking at recommending.

The next step in for WMATA’s General Manager, Richard Sarles, to propose a new budget in January, and some of these improvements could be funded by local jurisdictions or fare increases. The actual deficit for the current service is $66 million, which could be covered by a modest increase in fares in the new budget, similar to the rate of inflation since the last fare increase.