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