Metro Positions Itself for the Big Ask

metroby James A. Bacon

Staring into a fiscal black hole, Washington Metropolitan Area Transit Authority Chairman Jack Evans is trying to nail down the authority’s 2018 spending plan by November, months earlier than usual. The move, suggests Washington Post writer Martine Powers, “is a signal that the transit agency is preparing to ask the District, Maryland and Virginia for additional money if fares are not raised or the federal government does not come forward with more funding.”

How much money? Between $75 million to $100 million per jurisdiction.

Evans issued the warning after a meeting in which the WMATA board discussed a presentation by McKinsey & Company indicating that the mass transit organization was paying significantly more for expenses than comparable transit agencies.

The McKinsey report, issued in April, is must reading for Virginia legislators pondering how to respond when WMATA approaches, tin cup in hand, begging for more money or risk seeing the collapse of the mass transit service so critical to Northern Virginia’s economy. That report clearly lays out the management challenges facing the authority and provides concrete ideas on how to address them.

WMATA’s long-term mismatch between revenues and expenses has been getting worse, not better. According to McKinsey, Farebox recovery has declined from 47% of costs in 2011 to 45% today and will continue to drop further as passengers fed up with the rail system’s poor reliability commute by other means. Rail system revenues would need to grow at 7% yearly just to maintain the current operating deficit. Personnel growth averaging 5% annually has driven most of the cost inflation. The authority has more employees who getting paid more (wages growing 4% annually) to work less (regular hours per full-time equivalent employee down 2% annually).

Poor railcar maintenance is the single-most important driver of service unreliability — 63% of all rail line delays are caused by railcar failures, the report says. There are two main reasons for cars being unavailable: parts are frequently out of stock, and repair throughput is exceptionally low. “Estimated technician wrench time ranges between 25% and 40%, below a best-in-class standard of 60%.” The reasons for the low productivity can be traced to systemic management failures such as the uneven distribution of cars between shops, turnover in mechanic staff, and technicians starting work orders without all necessary tools and parts.

The report also took note of the high cost of MetroAccess, a transportation service for people with disabilities. McKinsey estimated that WMATA could cut the $110 million program’s costs 20% by experimenting with innovative delivery models. The report also recommended extensive changes to WMATA’s capital allocation model and the structure of its pension, retirement-benefits plans and workers compensation plans.

Bacon’s bottom line: The McKinsey report provides an objective checklist of reforms that WMATA needs to make before entrusted with any more Virginia taxpayer dollars. Give management the money without conditions, and the urgency to implement the reforms disappears. Make added money contingent upon implementing reforms, and WMATA actually might wind up needing less than it thinks it does. If WMATA’s board and management are unwilling or unable to execute these of equivalent reforms, Virginia should give them no more money.

Hat tip: Tim Wise

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18 responses to “Metro Positions Itself for the Big Ask

  1. Thanks for posting this so I read it right after I ate.

    So why should the rest of the area pay for their management screwups?

  2. Receivership suggests itself. Otherwise, no guarantee that reforms will be implemented. Of course, I’m sure that the lefties on this blog will oppose those reforms on the grounds that someone else doesn’t have to do those reforms, so why should Metro?

  3. I’m sure righties would argue otherwise but when you do not have a reliable source of funding – it’s much harder to program required maintenance and capital investments and it actually engenders a seat-of-the-pants management mindset.

    VDOT has made this point repeatedly in arguing for more funding and good lord – the General Assembly just rolled over and gave them that money without reforms. gawd o’mighty!

    So the very first “reform” -the one you have to do before you can expect others to work – is to have a reliable – a known and expected source of funding for which to be able to plan.

    but beyond that – if as a conservative with integrity – you’d have to advocate that ‘reform’ without adequate money – really means shutting it down if you really don’t want to provide an assured source of funding.

    You can’t run on a shoestring then whine about problems that are essentially caused by a lack of funding.

    Pity Conservatives don’t have a consistent attitude about funding when it comes to say – DOD spending – which is the epitome of throwing money at a problem.

    ” Congress funds problematic weapons the Pentagon does not want
    A third of a billion dollars for an extra warship is just one of many pork-barrel items being forced by lawmakers on the Department of Defense in a spending bill about to come up for a Senate vote”

    https://www.publicintegrity.org/2016/07/05/19869/congress-funds-problematic-weapons-pentagon-does-not-want

    no whining about reforms and “farebox recovery” on that, eh?

    • Larry,

      Standard leftie talking points. “Everybody else does it”. “We need more government money” “Therefore, we need higher taxes.”

      All you are really doing is making the case for why government should be involved in anything as little as possible. Impacted market, Larry, impacted market. Get with the Econ 101. Government throws more money at a problem because it can. There’s very little in the way of checks and balances.

    • Even without a dedicated source of funding, such that it has to seek out annual funding from state and local government annually, WMATA is an extremely unresponsive agency. I can only imagine how much more unresponsive it would be without the need to ask for funding annually. It lacks any sort of internal controls.

      The best proof is when then Governor Tim Kaine refused to allow WMATA to be in charge of the construction of the Silver Line. Instead, he gave the job to MWAA, and, for the first time ever, WMATA was not involved in expansion of the Metrorail System.
      “Frankly, Scarlett, WMATA does just doesn’t give a damn.”

      • I can’t disagree about WMATA management – but short-funding it – guarantees dysfunctionality.

        Remember – VDOT and the US 460 and PPTA fiasco or for that matter other NoVa VDOT fiascos.

        If your standard response is to cut their funding until they get fixed – then why don’t we take that same approach with VDOT?

        I think WMATA has a problem. When Fox of Federal Highway is on their case then you know there is a problem. But how you fix WMATA is not by short-funding it – which I would maintain is part of the reason why they are dysfunctional.

        If you put ANY management team in a position of not having enough money to properly do maintenance – then how intelligent is it to blame them for safety issues?

        You won’t get them to do any better by refusing to properly fund them. All you do is guarantee that problems will continue.

        I see that is the dumb way to reform and I ask what is the real purpose if demanding that until they fix the problems caused by underfunding – we will continue to underfund them?

        This is why Conservatives cannot govern. They simply cannot figure out how to get from a bad place to a better place without just guaranteeing even worse results – because their process is based more on ideology that practicality and realities.

        You cannot run any operation effectively by underfunding and threatening even less funding if they don’t fix the problems caused by underfunding.

        • >>This is why Conservatives cannot govern. They simply cannot figure out how to get from a bad place to a better place without just guaranteeing even worse results – because their process is based more on ideology that practicality and realities.>>>

          If you say so, Larry. The practical realities are something you never want to come to grips with .

          • crazy – the reality is that they’re not going to shut down WMATA.

            you start from there.

            how are you going to get their safety issues addressed without more money?

        • Larry – I’m arguing not to cut funding for WMATA, but to retain its present obligation to request money annually, at least pending major reforms. WMATA has a $2 billion pension funding deficit, but isn’t even considering capping its loses and moving to a defined contribution plan or, at least, a combined plan.

          If WMATA were a public service company, privately owned, but regulated, it would have addressed pensions years ago. WMATA spends money like the DoD, but doesn’t due repairs or correct repairs. Fix some of the problems, before it goes asking for more money.

          • @TMT – how are you going to fix their safety issues without more money to do that?

            I don’t dispute at all that they’ve got management problems to include financial management but again -how do you fix the safety problems right now – today -without more money?

            if you say – no more money -then how do you expect the safety problems to be fixed?

            if there was not enough funding for maintenance to start with that then led to safety issues not fixed… then how do you fix that?

            Now -if the claim is they had the money but squandered it then what was it spent on instead? If there was illegal activities then go after those that committed the crimes. If it was malfeasance then get rid of them and replace them but that still leaves you with how you’re going to fix the safety problems and where was the money to do that to start with?

            we need to judge WMATA with respect to other transit organizations to see if it actually is different and in a bad or wrong way especially from a fiscal perspective.

            If it is – then clean house but also insure it actually is adequately funded so that proper maintenance is possible rather than not doing and waiting for disaster.

            If it is NOT materially different from other transit organizations then judging it in an ideological anti-govt way (not you) does not solve anything – it just insures further bad outcomes.

            Every major first world country as well as many 3rd world nations – on the planet has transit – and most of them are not funded solely from farebox. They are considered in the same realm as education or police, fire and rescue, or other necessary tax-funded services.

            I’m not advocating that we do that – only pointing out that adequate funding to ensure safe operation is not consider optional nor a sign of government failure – … it’s necessary for the health and safety of citizens.

            Whether it costs “too much” is attended to in the same way that one would claim that police or fire or education -or the military costs “too much” but you don’t start with the premise that it costs too much to start with and then proceed to cut funding more “until they reform”. That’s where competent governance is required and not optional and why I feel that some types of politics these days are just ill suited for that role.

  4. principled righties make that case up front without wavering.

    make your case for METRO… be honest…

    What I’m saying is that if you’re going to have a metro – you have to fund it lie you fund VDOT – by providing enough revenues so you can effectively plan operational , maintenance and capital facilities.

    If instead you donj’t want to do that – and you want to short-fund it then claim it’s poorly run – then that’s just dishonest.

    Either fund it equitably at what it actually costs to run it – or admit that you really disagree with the basic concept – and honestly advocate for not funding it at all.

    don’t play the silly game that is being played .. that’s not for folks with integrity and principles.

    bottom line -stand for what you believe it – without wavering.

    we fund VDOT -at the level that VDOT says they need tobe funded to properly plan maintenance and capital investments and I’ve yet to hear a single rightie say ” Get with the Econ 101. Government throws more money at a problem because it can. There’s very little in the way of checks and balances.”

    why do we give VDOT a free ride? why we do have a double standard when I would expect people with integrity and principles to hold the same view regardless of whether it’s METRO or VDOT.

    • >>we fund VDOT -at the level that VDOT says they need tobe funded to properly plan maintenance and capital investments and I’ve yet to hear a single rightie say ” Get with the Econ 101. Government throws more money at a problem because it can. There’s very little in the way of checks and balances.”>>

      You just did! In any event, you’re talking about politics, not economics. Politics is why you should place very little of what would otherwise be economic activity in the hands of government.

      Over and above that, it is axiomatic that you have to pay for the things you want. But where I part company with you is in your following statement:
      >>Either fund it equitably at what it actually costs to run it – or admit that you really disagree with the basic concept – and honestly advocate for not funding it at all.>>

      This is question begging of the worst sort: “what it actually costs to run it” is what is to be determined, never mind that there’s a difference between “what it actually costs” and what it SHOULD cost.

      We’ve had this conversation on previous occasions. the private sector can do this job; it did it in New York. If there’s a need in the marketplace for the system, then the private sector will step up and make a profit doing it. Of course, because of the obvious problems securing easements and the like, this becomes a tedious task that will inhibit the private sector from doing it. (See e.g. WSJ article today about why housing starts are more problematic in San Francisco and New York than in Raleigh or Atlanta. (Take a guess. Imagine our surprise! more government regulation in the former, less in the latter). The question really is whether the federal government thinks it’s important enough for its workers to live in MD and VA to pay for the Metro. Of course, then you can really forget about accountability for the result.

      You see, Larry, you just can’t limit the question to whether or not there’s a steady stream of money, though lefties like you want an ever-growing one of those for just about everything, education, transportation, health care, housing etc. I wouldn’t even object to it if I thought there was even the remotest possibility that the money might bring a favorable result. The problem is: it won’t, and we all know it (Well.. except you). And because your default position is to throw government money at everything, you are constitutionally incapable of recognizing that flaw in the government’s funding of things.

      • re: ” You just did! In any event, you’re talking about politics, not economics. Politics is why you should place very little of what would otherwise be economic activity in the hands of government.”

        only in an ideological world. In the real world -government does provide services and infrastructure that the private economy does not.

        for instance – you don’t have roads without eminent domain and you don’t have free public education without govt nor clean water or proper sewers, etc.

        “Over and above that, it is axiomatic that you have to pay for the things you want. But where I part company with you is in your following statement:
        >>Either fund it equitably at what it actually costs to run it – or admit that you really disagree with the basic concept – and honestly advocate for not funding it at all.>>

        This is question begging of the worst sort: “what it actually costs to run it” is what is to be determined, never mind that there’s a difference between “what it actually costs” and what it SHOULD cost.”

        Oh I agree with your premise but not how you decide what it SHOULD cost if you do it in isolation and not at other similar operations …

        “We’ve had this conversation on previous occasions. the private sector can do this job; it did it in New York. If there’s a need in the marketplace for the system, then the private sector will step up and make a profit doing it. Of course, because of the obvious problems securing easements and the like, this becomes a tedious task that will inhibit the private sector from doing it. ”

        that’s hilarious Crazy. The issue of the private sector obtaining “easements” is “tedious”. geeze guy. see this is why I say this is not dealing with reality…

        “(See e.g. WSJ article today about why housing starts are more problematic in San Francisco and New York than in Raleigh or Atlanta. (Take a guess. Imagine our surprise! more government regulation in the former, less in the latter).”

        you mean we should do it like they do it in 3rd world countries where people live in slums just outside the city? That’s how we should let the free market “work”?

        ” The question really is whether the federal government thinks it’s important enough for its workers to live in MD and VA to pay for the Metro. Of course, then you can really forget about accountability for the result.”

        we fund roads from taxes. we can’t fund transit the same way?

        “You see, Larry, you just can’t limit the question to whether or not there’s a steady stream of money, though lefties like you want an ever-growing one of those for just about everything, education, transportation, health care, housing etc. I wouldn’t even object to it if I thought there was even the remotest possibility that the money might bring a favorable result. The problem is: it won’t, and we all know it (Well.. except you). And because your default position is to throw government money at everything, you are constitutionally incapable of recognizing that flaw in the government’s funding of things.”

        you totally live if a dream world on this. I don’t think that way at all. I do point out that those who claim throwing money at something is wrong that they don’t keep that consistent philosophy for all functions just the ones they are ideologically opposed to.

        I’m actually opposed to throwing money at ANYTHING but that does not mean I do not think the govt should not be funding things – like POLICE which I bet you think the govt should be doing also… do you ever think we “throw money” at police needs?

        seriously? have you considered what the “correct” amount of funding for police should be? do you think it is – whatever we spend?

        😉

  5. This evening at 8 O’clock on Fox News I tried to watch the mother of the one Benghazi heroes killed there in action, and two of the survivors of those dead American heroes, speak at the Republican Convention. Unfortunately their appearances on my TV was destroyed and erased by Bill O’Reilly running his big fat mouth. I will be sure never ever, not once ever, to allow myself to be exposed to Bill O’Reilly’s rude and narcissistic motor mouth again. I hope others will join me in mass, so as to run motor mouth off the air.

  6. The context of the referenced McKinsey report was not really made clear and it should have been in my view – to wit: “Metro’s board of directors hired the consultants to assist new General Manager Paul Wiedefeld with setting priorities for the agency’s turnaround.”

    In other words METRO itself is the one that commissioned this scathing analysis, but it gets characterized this way : ” …must reading for Virginia legislators pondering how to respond when WMATA approaches, tin cup in hand, begging for more money or risk seeing the collapse of the mass transit service”

    Good grief! METRO is seriously going about reform – and here we have the “no mo govt” folks using Metro’s own hard-nose self examination – as a weapon to go advocate legislators further screw up their funding.

    What in the world? How can we fix anything if this is how we go about it?

    How do we fix ANY problem whether it’s DOD, or VDOT or local police if we basically advocate starving their funding – as they are actually trying to correct the problems? It’s like the real motive is to NOT have them reform.

    Call that a “leftist” viewpoint if one wants – I think it’s more properly referred to an adult approach to actually trying to fix problems.

    You cannot fix problems by further disrupting/vandalizing the very thing you’re complaining about. One has to believe that the real purpose is not actually to fix it – but to further cripple it – because the folks opposed are basically opposed to the very concept of transit, unions and the govt involved in providing transit – in the first place – so kill it however you can.

    no?

    • The fact that the WMATA board commissioned the McKinsey report is all the more reason to use its recommendations as the basis for dealing with WMATA. As I have made clear repeatedly, WMATA is “too big to fail.” Virginia cannot afford to let it slide down the tubes. On the other hand, we can’t write a blank check to bail them out. We need to extract concessions. What more reasonable concessions to ask for than the recommendations in its own study?

      What’s your solution, Larry?

  7. So why should METRO even commission a hard-look self examination if it’s opponents are going to use it as a weapon to threaten taking even more funding away?

    that’s a “solution”?

    that’s bizarre – they’re struggling to reform – and you’re using the specifics of their own cited deficiencies to advocate short-funding them more?

    My solution?

    first off – obviously – HELP THEM reform if that’s their trajectory – instead of actions that will encourage more failures… geeze

    Second, IF we KNOW we’re NOT going to get rid of METRO , then the job is to make it work right – efficiently and as cost effectively as possible just as we would do for VDOT or PPTA or police or ANY necessary function we know we’re not going to get rid of because it’s not working properly.

    threatening to take even more funding away from WMATA – when there are already clear signs that it’s not adequately funded enough right now for basic safety upgrades and maintenance, is not constructive – it’s destructive.

    One of the solutions – has to be – to find and implement a reliable and sustainable source of minimally adequate funding. To not do that is going to assure continuing shortages of critical parts needed for repairs and continued deferred and delayed maintenance until another disaster strikes then we’ll once again go through this “we gotta reform METRO without writing a blank check” goofy stuff.

    What’s the “right” amount of funding for WMATA? Tell me what the “right” amount of funding for VDOT is – and if you don’t know – why in the world would you blindly advocate less funding?

    We’d just cut VDOT because we “think” they spend too much?

    Methinks the double standard difference here might have something to do with ideology because we KNOW right now that we have bridges across Virginia that are failing and in need of repairs and replacement but I never ever hear the folks who complain about WMATA make a similar complaint about VDOT much less that we should threaten their funding if they don’t fix those bridges…

    double standard?

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