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There are other potential areas in WMATA’s proposed FY2011 budget that might yield some savings or revenue can without a major impact on service or fares. These include better fare collection and labor costs.

Fare Collection: Sometimes customers are willing to pay a fare, but there is not a reasonable means to do so, or where current policies are easily abused. Here are some ways to increase WMATA’s ability to collect fares:

  • Increase the ability of “Exitfare” machines to accept larger bills and credit cards. Why is this necessary? Say a customer enters entering at Union Station at 3:30 pm and travels to Shady Grove. He may mistakenly purchase a farecard for $2.35. When he arrives at Shady Grove, he is told to go to the Exitfare machine to pay an additional $2.15, but he only has a $10, $20 bill or credit card, none of which work on the Exitfare machine. The station agent is supposed to let the customer exit anyway, but Metro loses $2.15. I don’t know how much revenue this would bring in, but based on anecdotal evidence, I estimate $1 million annually.
  • Modify the software so station managers can deduct full fare from customers whose cards did not register when entering or exiting the system. If a customer’s card did not register when entering the system, the faregate directs her to the station manager when she attempts to exit the system. After reading the card, the station manager will ask the customer her point of origin. Even if she answers truthfully, the station manager has only two choices: charge the fare from the customer’s last point of origin that reads on the card, or charge the minimum fare or some multiple of the minimum fare. For example, say the customer enters the system during the peak period at Takoma and exits at Shady Grove. She owes $4.50. The most the station manager could deduct would be $3.30 (2 times the minimum fare of $1.65) without overcharging the customer. WMATA loses $1.20 on this transaction. This is a frequent occurrence daily at all stations throughout the system. I don’t know the revenue impact of this either, but based on anecdotal evidence, estimate it at $1 million annually as well.
  • Conduct more preventive maintenance on bus fareboxes. When the machines are not working, Metro’s policy is to let customers to ride free. If passengers are transferring, WMATA picks up some of the lost revenue, but a large portion goes uncollected. I also estimate this at around $1 million annually.
  • To minimize sharing of weekly paper bus passes or utilization after expiration dates, issue these passes on a SmarTrip card. We have no way to know the revenue loss from pass sharing right now.

Union labor costs: WMATA and its unions are required to settle their disputes through “final and binding” arbitration. WMATA and Amalgamated Transit Union (ATU) Local 689, the largest union, failed to reach an agreement on the labor agreement that expired June 30, 2008. The two parties went to arbitration with several months of hearings, hundreds of pages of evidence and several dozen witnesses presented by both sides. The neutral arbitrator issued his award in November, 2009 and a fractured majority of the board of arbitration signed off on its provisions.

The award provided for pay increases of 0%, 3%, 3%, and 3% annually (plus a 2% lump sum payment). About $10 million in health and welfare costs over the term of the contract were shifted to employees and the arbitration incorporated a labor-management pension trustee restructuring of the 2008 pension liabilities (when the market dropped substantially) to spread them out over 30 years. This reduces WMATA’s immediate cost by about $33 million for FY 11 but increases the risk factor for current and future retirees. The provision also provides that any excess pension earnings (over the target for the plan) will go to reduce this liability.

WMATA has appealed the arbitration decision to federal court asking for review of both the wage issue and the pension issue, where it seeks further relief. At the Prince George’s WMATA budget forum in Nov. 2009, the union called for WMATA to abandon its court case and sit down with the union to discuss cost saving measures. WMATA has not yet responded to this appeal and time is now growing short for any substantive discussions.

A court hearing on the motions regarding the case is scheduled for March. Court relief for WMATA or some type of agreement with the union is not out of the question, but the New York MTA lost a similar court appeal and a recent attempt to reach such an agreement in Chicago, where over 1,000 layoffs have occurred, resulted in a vote by the union membership to reject any changes to the current agreement.

More likely, some relief will come through the pension agreement. Stock and bond markets rebounded considerably in 2009 (although not returning to 2007 levels). WMATA calculated their pension payments for the FY 11 proposed budget based on actuarial estimates as of November 1, 2009. However, about 1/3 of the gains for 2009 occurred in the last two months of the year. If WMATA updates their valuation for the end of 2009, they’ll save some money in the budget, whcih I roughly estimate to be around $4 million. However, there are many other factors an actuary will have to consider, and the final savings could be lower or higher.

One consequence of WMATA appealing the arbitration decision was the failure to install measures that shifted some health and welfare costs to employees in FY10. WMATA has included these cost savings for its FY11 proposed budget, but has not included any recapture of the lost cost savings for the last half of FY10. The cost shifting by increasing the cost of HMO coverage for employees and decreasing WMATA’s share can likely be recovered through increased rates once the contract issue is finally settled. If WMATA includes this cost recovery in its FY11 budget, it will likely see savings in the $1 million range.

The total of these pension and health and welfare savings total approximately at $5 million.

Salaried Labor Costs: These are directed at middle and lower level management. WMATA has already targeted upper level management and their support staff for proposed reductions in FY11 on top of reductions in previous years. In addition, they previously made major cuts in middle level management in bus and rail operations in previous years. While more can probably be done, it may be better to focus on areas that have been left relatively untouched.

WMATA has a number of maintenance divisions and multiple departments within those divisions. The ratio of middle level and first line managers or supervisors to workers is often less than 10:1. These management positions include superintendents, assistant superintendents, supervisors and some administrative support personnel. There are some studies that have suggested a ratio of 15:1 may be more appropriate.

The ideal ratio can change based on number of shifts and geography and this is a factor at WMATA. The number of superintendents and assistant superintendents also seems to be on the high side, although the specialized nature of some of the work may be one reason. No one wants to see maintenance degrade, but it seems likely that departments that perform related work could do with a single set of middle management personnel and some consolidation of supervisory personnel without an effect on the work being performed.

In the FY11 proposed budget, WMATA’s Operations Services department eliminates no salaried positions in is $137 million budget, although some positions were transferred to the capital budget. In Rail Operations Delivery, there was a $471,000 reduction in salaried positions (probably 4-5 positions) out of a budget of $503 million. In Bus Services there were no salaried positions eliminated in a budget of $407 million.

Without more detailed study, it is not possible to quantify the savings of reducing the ratio of maintenance supervision, although moving to a ratio of 12.5-1 may result in savings of around $2.5 million—roughly 20-25 positions.

Together, these three areas could save around $10.5 million range. WMATA should examine all of them more closely.

Next: Putting all of this together into a budget alternative.

Disclosure: Craig is the Legislative and Political Representative for ATU Local 689, the union representing most WMATA employees. All opinions posted here are his own and not the offical position of ATU Local 689.